Friday, October 21, 2011

Gold Accumulation: The Best Way to Save?

Jesse Livermore, the famous Wall Street trader, believed that in bull markets you need to sit tight and be right. This is what he said, "In a bull market the game is to buy and hold until you believe the bull market is near its end."

You can go through a lot of volatility in markets, short term, if you know the fundamentals of that market and look two or maybe five years down the line. The short term fluctuations which may flush out speculators are just noise in a long term bull (rising) market.

Since 2000, gold has been steadily rising in price. If you had understood the fundamentals back then and accumulated gold steadily at regular intervals, you would have taken best advantage of this bull run over the past ten years.

So, probably the best way to take advantage of a long term bull market is to invest in it regularly. This is called dollar-cost averaging and it takes away the need to look at the market on a daily basis to try and decide the best time to invest. With dollar-cost averaging, you win some and you lose some, but over the time of the bull market, you invest close to the uptrending line.

I hear often of people waiting for the price of gold or silver to drop before they jump in. Some waited when gold was $1000 per oz for a drop, then thought that the drop would continue and waited again. The price shot above $1000 quickly and they lost their chance to buy (according to that thinking) and gave up. If they had just put in amounts regularly, they wouldn't go through this mental and emotional turmoil.

There are many gold and silver savings programs around. YOUnique are a good option. As a disclosure, I have been involved with this company for nearly four years in a savings and ownership capacity. You can save for physical gold and silver grams each month starting from US$25 per month. You are also able to redeem these grams in USD whenever you wish.

If we do continue this phase of economic downturn, then the value of paper assets on banks balance sheets will decrease further. Banks worldwide are in trouble because of their high leverage. In fact, the end for banks could come sooner than we think. Eric Sprott recently mentioned the example of Dexia Bank in Belgium. Just three months ago it passed the European Bank stress tests. It was seen as extemely well capitalised. Today it has been taken over by France and Belgium because deposits were flying out the door and Dexia was running out of money.

This is why one day soon, people may prefer to own gold and silver rather than have money in a bank. Money in a bank is subject to great counter-party risk. Counter-party risk kicks in when people want their money back and the dominos begin falling. This is the contagion effect the world 's leaders are so concerned about.

The paper you had confidence in may not be worth the paper it's not written on.


Gold in New Zealand dollars: $2043.13 per oz
Previous all time high: $2284.16 per oz (19 Aug, 2011)

Silver in New Zealand dollars: $38.56 per oz
Previous all time high: $59.19
per oz (30 Apr, 2011)
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YOUnique Gold and Silver

Buy small, affordable physical gold and silver or start a savings program towards
physical gold or silver grams for as little as US$25 per month.

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The Anglo-Far East Company
AFE is the gold bullion custodial provider of choice for the sophisticated investor,
families, and institutions that require the highest level of discretion, competence,
safety, and service.
Your reference: an-001
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1 comment:

  1. BTW there was a segment on gold on Campbell Live last night. In case you didn't see the ads =]

    ReplyDelete