Monday, April 4, 2011

Are you still into Gold?

This is a question that I get reasonably often. And it’s a bit puzzling.

Along with the ‘Why do you buy gold, after all,  you can’t eat it’. But an answer for that question another day. Or perhaps another universe.

The first question is puzzling because I was usually not aware that these people even knew I had purchased any gold. Where did they hear this? But the most perplexing part of this is why they haven’t talked to me about it before?

I think there may be a number of reasons. We Kiwis are a shy type of bird and don’t often march up to someone, even if we know them well, and ask them about how much money have you have made or lost lately. Kinda not polite.

But I think there may be a more ‘disturbing’ reason behind the question. People are waiting for the right time to jump into buying gold and silver. Waiting for that perfect moment when they know definitely that they will make money.

The right time.  Now there’s the investor conundrum in three words.

Tell me the exact right time to invest in anything and I would probably own all the resources that exist. But don’t worry, I’d be a great World Dictator and be graciously benevolent and give you a ‘little’ bit. Maybe.

So with precious metals, when do I consider the right time to invest or buy. The advice I have taken, and that has worked for us, is to use the ‘dollar cost average’ approach. That is you buy regularly and often when you can afford to.

But the typical new investor will think this way:

I will wait for the price to drop and then I will buy.
The price drops
Oh, I will now wait a little longer as the price has dropped and I don’t want to jump in now as it might dip further.
The price goes up
Oh, I think I’ll wait till the price dips again like last time and then buy some.
The cycle continues
The Investor never buys gold and silver

You see in precious metals you need to look at the fundamentals behind the market. Prices will fluctuate considerably at times. Your fear may get to you an you may never actually start to save in gold and silver. Look to the long-term and remain strong. If you do your homework and listen to the right people, you will feel less fear about what you are doing.

The bottom line for me is this. Government can 'create' money with computer bits and bytes. Gold and silver have been money for 5000 years and cannot be created by anyone.

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