Gold and Silver have seen big corrections to begin the traditionally strong Fall season. It’s important to ask yourself, “Is this correction a good buying opportunity or is it the beginning of crash from an all time high?” (See recent pre-rocket launch gold commentary here.) I’m on a board that manages a small amount of cash for ongoing and future expenses which has historically maintained a 100% US dollar cash position because it’s an expense and savings account and not meant to hold investments. At our recent annual meeting, I proposed that the board take a 15% position in a gold and silver fund to protect the savings from the risk of dollar devaluation (hedge the currency risk.) This was not done as an “investment” to make money, but as a protective measure in order to be less exposed to potential risk. I told them that I would personally take double that position if I were King of the Board, but since this was a new concept; this smaller position would be appropriate and sufficient.
I’ve edited my original writing to scrub the name of the fund I recommended. My recommendation to a person would be different to my recommendation to this board, but I thought it would be helpful to readers here if I expressed the points made.
I’m going to start with a few thoughts on the recent correction. I didn’t originally address this to this board because our meeting was held before this correction. Lucky for us! I don’t know when and where the market will go next, so I wanted to start with the market thoughts and then layer in with the rationale.
As of this writing, gold is down 11.5% in the last month while silver is down 29% in the last month for a total of about 40% since its peak in April. So the question is, if you own gold and silver, or if you’re about to make your first purchase, Should you be scared?
It seems clear to us that the answer is NO, you should be excited! These big moves always seem extreme and scary when you’re in the midst of them. However, in the grand scheme of things, they are not very consequential at worst and something that should encourage you at best. These recent drops are perfectly normal for these markets over the last decade. In percentage terms, the recent fall in price was very average. Of course, in dollar terms the price drops were large, but this is because the price we’re dealing with is much larger than it has been over any other time in history.
In the following posts of this series, we’ll get more into explaining why price drops in gold and silver are good and what to expect going forward. Now completed, you can find all posts from this series at: 1) Gold & Silver on Sale, 2) Reasons to Buy Gold & Silver, 3) Gold & Silver: About to Take Off?, 4) Why & How to Buy Silver & Gold?, 5) Gold Bubble?, 6) Gold Speculators or Savers?, 7) Gold Article Rebuttal, & 8) Gold Rebuttal Pt 2. This series began directly after the economic update video series was posted. Watch the previous videos in that series at: 1) Europe Economic Update 1, 2) Europe Economic Update 2, 3) Europe Crises Explained, 4) World Economic Update, 5) US Economic Update, & 6) US Economic Update 2.