Tuesday, August 23, 2011

$1,900 Gold

Gold crossed its next $100 milestone in after hours trading on Monday.  I remember having to wait months to years for gold to make a $100 move a few years ago, but its recent rise from $1,800 to $1,900 took only a few weeks.

It is for this reason that I would like readers to take caution at the present time in the gold market.  Back in 2007, over $1,000 lower in price, people still felt uniformly across the board that it was insane to hold gold in your portfolio.

Today, while the public has still yet to enter the market, major investment vehicles such as hedge funds have entered in force.  Daily sentiment readings show traders at 98% bullish for gold, and the GLD just became the largest ETF in the marketplace in terms of size.

While I believe gold is going much, much, higher over the next few years, its current rise has been parabolic over the recent weeks.  As I discussed with silver a few months ago, investors should hold their current positions and wait for an attractive pull back to enter the market.

Back at $500 and $600 an ounce a few years ago, investors could throw caution to the wind entering the market, but today you have to take the temperature of the market around you.

I believe that cash heavy investors that are looking to diversify out of dollars should take a look at the gold mining sector, which has not followed gold up in its current run.  While stocks can get hurt during stock market crashes, there is tremendous value in place in the mining sector.

I'm a not a professional stock picker, therefore I would recommend using professional resources such as The Gold Stock Analyst newsletter and/or a mutual fund such as Tocqueville to find the greatest value in the sector.

I will provide a major segment when we reach the $2,000 milestone.

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