Buying Gold and Seeing the Forest Through the Trees

forest

The gold market has certainly seen some ups and downs in recent years. After topping out near $2000 per ounce back in 2011, the metal has worked lower the last few years and has bounced off of the $1200 area several times. In fact, gold has been trading in a sideways range for some time now-about the last year. We feel that it is extremely important for one to look at the bigger picture when looking at precious metals investments, and we want to try and put recent price action in context. We consider an investment in gold or precious metals to be long term in nature, and here we will outline some reasons for our thinking. While the gold market has without a doubt seen an impressive run over the last decade, markets do not usually go straight up or straight down. In fact, one could argue that it is healthy for a market to pullback once in a while and do some back and fill trading. We are of the opinion that is exactly what we are seeing in gold right now- a pullback before another leg higher in prices. Take a look at the gold chart below going back to 2000.

gold-london

As you can see, gold had a very nice run to the upside from a price of less than $300 per ounce to nearly $2000 per ounce. That’s an increase in price of about 594 percent! What you will also notice is how gold maintained a very strong uptrend line until that trend line was broken in January of 2013. Gold prices then moved lower and bottomed out around the $1200 level and have been range bound since. In fact, gold prices have tested the $1200 level a few times and each time buyers have stepped up. In other words demand has met supply. Now, the fact that gold has thus far not been able to trade lower than this level may potentially indicate that the market has found a bottom. While nothing is ever set in stone, one has to look at all available information to try and reach a conclusion. It is our opinion that present information suggests a retracement in the long term uptrend in gold prices, and that the market is preparing for upside expansion once again. So, the question then becomes-would you rather buy gold when prices are higher or when prices are lower? Should the gold price breakout to the upside from the current range, today’s prices could potentially prove to be a great bargain in the grand scheme of things. What better time to add gold or precious metals holdings to your IRA than when they are effectively on sale?

Let’s also be clear about the trend in gold versus the market fundamentals. We feel that the market fundamentals are supportive for gold prices in the long run. One could discuss all sorts of reasons or issues that may potentially contribute to higher gold and precious metals prices. These issues could include such things as QE and money printing, deficits, sovereign debt issues, geopolitical risks and inflation. Let’s also not forget that gold is a resource with limited supply. The laws of supply and demand tell us that as demand goes up and supply goes down prices rise. Take all of that aside now for a moment, and once again look at the chart of gold since the year 2000.We feel the market is still in a longer-term uptrend. As we said above, markets do not usually go straight up or down and gold is no different. This appears to us to be nothing more than a pullback within the longer-term trend in gold prices. We expect that gold will once again make new all-time highs. There is a saying that says “The market is always right.” And it is. What that means is that price is really the only thing that matters-not how price got there. If you look at gold, and the fact that it is trending higher , one might conclude that for whatever reason market participants, whether it be banks, financial institutions or even retail investors, are buying gold and driving long term prices higher. Price speaks for itself. This again begs the question then-do I want to buy gold or add precious metals to my IRA when they are more expensive or less expensive?” We think it is important to “See the forest through the trees” so to speak.

Think buying gold or other precious metals at current prices makes sense? Want to learn more about the potential benefits of adding gold or precious metals to your IRA or portfolio? If so, please contact a knowledgeable AdvantageGold specialist today at 1-800-341-8584 to see just how easy and hassle-free adding gold to your IRA can be.

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Category |