Thursday, December 29, 2011

Precious Metals Fear And Panic

The precious metals market is in a complete panic right now.  Pessimism in the market is unprecedented, nervous investors are dumping their positions, and the weak hands are liquidating everything they can get their hands on.

I have not been this bullish on gold and silver in 18 months.  I hate to buy investments when they are rising and while I enjoyed the run up over the past year and a half in my current holdings, I continued to raise cash all the way up, sadly watching prices runaway higher.  I recommended the same thing to long time readers of this site, week in and week out, by saying the following:

Hold your current positions and raise new cash for a coming buying opportunity.

As markets soared higher I received emails and phone calls from people upset that they were not buying silver at $27, then $35, then $40 as it ran toward $50. 

When the price of silver hit $30 a few weeks ago I made my first investment in the market in close to 2 years.  When it fell I bought more.  Yesterday it fell and I bought more.  Tomorrow, if we are fortunate to have the price go lower I will buy more.  If it continues to fall, god willing, I will buy much, much more.

The people that desperately wanted to purchase silver at $40 now email me in panic on whether they should dump everything at $26.  Could silver fall to $21?  $17?  Back to $8 like in 2008?  I have no idea.  I hope so.  It will be years before I sell my silver.

If my goal is to have X number of ounces when we reach the mania stage of our bull market, when the sovereign debt crisis reaches the shores of the United States, then can I not buy more silver ounces at $8 than at $50?  Doesn't a lower price help me obtain more?

Some investors want to know if I think prices are going lower, shouldn't they sell today and try and re-buy in the future?  My answer is no.  I have no idea where prices are going tomorrow.  I do know that when prices are lower and sentiment is at extreme lows I like to buy. 

I do not know if we will wake up tomorrow to a global central bank intervention like we did 3 weeks ago.  I do not know if the Fed will announce QE3 tomorrow, or the ECB will announce QE1, or China will announce a new stimulus program, or Japan will announce another round of QE.  I know all these things are coming, but I have no idea which night they will occur while I'm sleeping. 

Do not be shaken out of your position by someone on television that makes money selling stocks and bonds.  Do not be shaken out of your position by your real estate agent who says that the best store of value would be purchasing a home.  Take a moment and think about if anything has changed in the global banking system that would make precious metals a worse investment because they are on sale.

For 18 months I have been saying to hold your positions and raise cash.  Now I am saying that it is time to take that cash and begin making purchases.

I am not a financial advisor.  Please contact one before making any investment decisions.

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