Being a gold & silver investor has become increasingly difficult over the past months with prices falling to 3-year lows. Recent price action has shaken up emotional investors, particularly those who simply watch price, technicals, or lack a core understanding of the fundamentals that truly propel the market long-term.
Any strategic investment requires discipline and mental fortitude to withstand the consolidations and pullbacks which eventually test any bull market prior to continuing its long-term uptrend. A market such as gold and silver is especially susceptible to price swings as leveraged electronic paper trading account for most of the activity. These factors will often cause these metals to overshoot during rallies and as well as in the corrective pullbacks most recently observed.
Technicals often distort the broader economic picture, making even the most confident investors uneasy. In any case, a market cycle or bull market does not end until the underlying factors that initially fueled the asset's appreciation are no longer valid.
With any investment decision, one must have a clear plan, outlined by a strategy, and defined by a final objective. At the supportive base of the strategy are the fundamentals, providing validity to the investment decision.
Without a plan, the novice is easily spooked, proceeds to sell prematurely, and swiftly transfers wealth to those who understand the underlying fundamentals and stick to their defined strategy.
"Write your plan down and follow it. When you have doubts, read it. Warren Buffett once said, 'Put all your eggs in one basket and then watch that basket very carefully.' That to me is very sound advice." - (Mike Maloney- Guide to Investing in Gold & Silver).
A precious metals investor must consider if the fundamentals for which he or she has invested still remain intact. Below are a few to consider:
Is the financial crisis in the Western world over?
Have the G20 countries balanced their budget?
Have commercial banks managed to become solvent?
Have economic tensions around the globe improved?
Is a global competitive devaluation to increase exports eminent?
Have central banks become increasingly politicized?
Is the European periphery still financially challenged?
Do the Asian countries still have a cultural affinity to precious metals?
Have central banks stopped exponentially creating currency?
Are bank bailouts & bail-ins still a threat to the average saver's account?
Have US budgetary concerns been resolved?
When factors such as those above have aligned throughout history, the free markets have repeatedly elected gold and silver as true money and the ultimate store of value. While issues may appear to temporarily subside via illusive credit bubbles, they will persist as the problems lie at the core of our monetary system and in the "nothingness" that backs it.
The fiat currency scheme is a con game backed only by the confidence the public grants it, once this ruptures the end is clear and eminent. Today we are only beginning to witness devaluation at a global scale, being pumped into cheaply financing government debt and propping equity bubbles without any fundamental underlying growth. A shadow of doubt is creeping over today's monetary central planners from the BOJ, the ECB, the FED, etc.
Bullion is what we continue to buy and accumulate, as we are playing a game of ounces. With government and central bank currency intervention on the rise, the counter-party free appeal of gold and silver are unique as are their status as a store of value by over 5000 years of history across the globe.
"Technical analysis is right 55 percent or 60 precent of the time, but fundamentals are right 100 percent of the time, and always, always, always, always, prove themselves over time". - (Mike Maloney- Guide to Investing in Gold & Silver).