The Top 3 Rules to Understand About Gold & Silver Price Behavior
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Posted 29/08/2012
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Over the past 10+ years of this gold and silver bull, I’ve seen gold and silver“newbies” repeatedly make the same mistakes. So I’ve decided to write this short article to help people more clearly understand gold and silver price behavior. There are 3 solid rules to follow and understand when buying gold and silver bullion and ormining stocks. Because of the lack of understanding of these rules, many investorsunfortunately unload gold and silver assets at the exact wrong time, at the bottom of long corrections and right at the beginning of huge new legs higher. Back in mid-May,when I wrote that it was a very low-risk, high-reward point to buy gold and silverassets, virtually no one outside of the very small circle of seasoned gold and silverinvestors were interested. Now that gold and silver have risen considerably sincethat point and time, there is more interest than just a few weeks ago, but again, somenewbies will make the mistake of buying into gold and silver now, and on any slightpull back, listen to the doubts disseminated by the mainstream media, and panic sellagain.
I previously stated on August 16, 2012, the following: “The one thing I canguarantee, however, is that when gold and silver finally make new highs, and theywill, some of the ferocious moves higher are absolutely going to stun a lot of people.” And I still stand by this statement. In retrospect, I don’t consider the recentmoves in gold and silver to be part of the “ferocious moves higher”. That hasn’thappened yet and we’re still a bit away from the manifestation of the scenario thatwill trigger these moves. Still, some of the moves higher in gold and silver that willhappen over the next 1-2 years will be so rapid and shocking that to most people,they will seem impossible given the psychological damage done by the past 18-month gold & silver correction and consolidation period. And to those that pay too muchattention to the mainstream financial press and not enough to the realities of thephysical, not paper, gold and silver markets, these violent moves higher will belikewise shocking.
Because gold and silver have been so suppressed for an extended period of time theconsequent defensive actions of exiting PM mining stocks and re-purchasing them atsolid re-entry points has left many gold and silver investors weary and with anegative outlook ahead. Though patience is a virtue when holding and stacking gold and silver assets, this virtue is much more easily vowed than practiced, especiallyduring volatile periods of price behavior upward and downward during an extendedconsolidation phase. However, those that are able to see through the volatility gamesof banksters will see something entirely different – a solid base for gold and silver’snext move higher to escape the banking cartel’s price suppression schemes. Thus,even though it is likely for gold and silver assets to take a breather this week and for a pull back in prices to happen before the upward trek continues, whether gold andsilver are rising or falling, every gold and silver investor needs to understand the top 3 rules when holding gold and silver assets. So here they are:
(1) Volatility Does Not Equal Risk.
Far from it. In fact most volatility in gold and silver is deliberately manufactured by the banking cartel, and is manufactured in fake paper derivative markets in whichprices are set with absolutely zero regard for the actual physical supply and physicaldemand determinants of these two precious metals. Furthermore, since bankercartel manipulation of paper gold and silver derivatives plays such a big role in pricevolatility, moves in gold and silver are often just as violent to the upside as they are to the downside after long periods of consolidation, as violent moves higher are oftencaused by short-covering of panicked hedge funds and banking cartel members thatare forced to unwind shorts when the momentum to the upside becomes too great forthem to suppress. Furthermore, after brief periods of very quick rises, anothershort-term correction triggered by day traders taking profits and/or desperatebanking cartel members actions in paper markets does not mean the uptrend hasreversed back downward again…which bring us to Rule #2.
(2) Lack of Patience is the Greatest Enemy to Buyers of Gold, Silver and PM Mining Shares.
With physical gold and physical silver, bankers deliberately create massive volatilityin paper prices at times to discourage the uninitiated from buying physical and to tryto goad those already in to mistakenly sell. With PM mining shares, the greatestmistake investors make with this asset class is to let the bankster created artificialvolatility in mining shares discourage them into selling out of all of their shares rightbefore the next great leg higher. While it is true that the vast majority of gold andsilver mining shares in the junior resource sector are junk and inflated pipe dreams,even cashed-up, solid junior mining companies will be taken down in price duringbankster raids on paper gold and paper silver and thus, patience with junior miningcompanies is essential to coming out on top.
One of the top performing gold stocks lost more than 50% of its value a few yearsbefore the onset of the Great Depression before going on a spectacular +1,258% runhigher that ended in1939. Those that were impatient because they were unable tosee the big picture of the importance of gold during periods of severe economicinstability sold out when this stock corrected sharply, locked in losses, and receivednone of the spectacular gains. Many today will repeat this same exact mistake.
(3) Ignore the White Noise and Disinformation Anti-Gold/Anti-SilverCampaigns of the Commercial Banking Industry.
Clients that allocate money to physical gold and physical silver purchases or PMmining share purchases translates into lost revenues for fee-based managed money commercial banking and brokerage firms because this normally translates intomoney that leaves these firms and never comes back. Thus, the vast majority of commercial banking/brokerage firm employees have great incentive to prevent theirclients from purchasing any gold and silver assets of any nature, including evenrobust PM mining stocks.
Thus, when the most robust PM mining shares are at super undervalued valuationsand represent a low-risk, high-reward set-up, commercial banking/brokerage firmemployees are likely to tell you there is ZERO opportunity in PM mining shares.However, when great runs higher in gold and silver assets occur, uninformedcommercial banking employees are likely to inform you of this situation and goad youinto purchases right before the next steep correction, as was the case when silver hit $50 an ounce last year. A sharp, rapid and significant correction in the first month ofbuying gold and silver is a lesson likely to keep many “newbies” from ever returningto the gold and silver markets in the future.
Source: http://www.24hgold.com/english/news-gold-silver-the-top-3-rules-to-understand-about-gold--silver-price-behavior.aspx?article=4032367254G10020&redirect=false&contributor=JS+Kim&mk=1