Hold PMs into a Market Selloff
Source: GoldSeek, Peter Cooper (6/9/11)
"A buy-and-hold strategy makes more investment fortunes than manic trading."
It may be counterintuitive, but holding onto precious metals into the growing selloff in financial markets may make sense for many investors. Becoming a trader and hoping to cash out now and buy back later at lower prices is all very well in theory, but it may turn out badly in practice.
The biggest risk for the non-professional trader is not that prices will suddenly shift higher after you sell, but rather that you will be too cautious about buying back and that markets could move quickly to the upside.
If that scenario follows—and it's one highlighted recently by Jim Sinclair, who correctly forecast the current gold price a decade ago—an investor who sells now is left holding cash at a point when gold prices might well take off to the moon. Sinclair sees gold going to +$12,500/oz.
The buy-and-hold strategy has made more serious investment fortunes than manic trading, which at its worst is nothing more than casino-style gambling. Investment timing is seldom easy; so why do it if you know the long-term direction of an asset?
However, there's a particular reason for being confident that any downturn in gold and silver prices will be short term this time. Global money-supply expansion is out of control and such an inflationary outlook always favors precious metals as a money with a fixed supply unless interest rates are raised above inflation.
So, if assets like stocks, real estate and bonds are sold off, where does the money go? It'll be converted into precious metals, and that inflow could come very suddenly, catching those who have sold their gold and silver off guard.