When investing in gold was all the rage we noted that gold is not a panacea. People who make timely gold investments can make a lot of money and people who simply buy with the belief that it will always to up get burned. If you bought gold bullion in 2000 and stored it you could still sell it today for a six fold profit. If you had sold it in 2011 you would have made a nine fold profit. In the meantime you have made no current return on investment. A fundamental analysis of gold bullion prices will tell you that gold has periods of substantial appreciation followed by monumental loss. When investing in gold be mindful of the old saying from the California Gold Rush days. When everyone is digging for gold is the time to be selling picks and shovels.
A Brief History of Gold Prices
President Nixon took the USA off the gold standard in 1971. Up until that time gold sold for $32 an ounce but you could not own gold, only rare gold coins or gold for jewelry or industry in the USA. In the aftermath of the Vietnam War and expansion of social programs the USA went into a decade of rampant inflation. This was great for gold prices as gold soared briefly up to over $800 an ounce. It backed off that price and traded in the $500 range until the bottom fell out. The price of gold bullion settled in the $200 an ounce range where it stayed for nearly twenty years. Then, when interest rates fell after the dot com bubble burst gold started to go up again and peaked at $1,900 an ounce in 2011. Timely gold investments along the way when prices fell and timely sales of gold when it rose in price resulted in handsome profits.
Blood in the Streets
There is a famous saying attributed to Baron Rothschild to the effect that the best time to invest is when there is blood in the streets, even your own. When naïve investors jump into an investment they typically run for the exits when prices fall. And they never come back. The time to buy any cyclical investment is when prices bottom out. Knowing what is the bottom for gold prices requires that you pay attention to the market and that you routinely analyze both the fundamentals that set gold prices and the technical aspects of the gold market. It also requires that you consider ways to make timely gold investments that do not require you to buy gold!
Gold Mining Stocks, ETFs and More
Gold mining stocks tend to rise faster than the price gold in a bull market and fall further and faster than gold in a bear market. Since gold is currently in a bear market one might consider looking at gold mining stocks in search of bargains in the form of timely gold investments. Gold exchange traded funds simply track the price of gold bullion. If you believe that gold has bottomed out you can make short term profits by simply buying stock in a gold ETF and selling when the price of gold fluctuates upward. As with all investing beware of tips and check things out with your own fundamental and technical analysis before buying or selling gold in any form.