Trying to market time a volatile gold and silver market is a fool’s errand
It is all now painfully obvious what the future holds for gold and silver. Deflationary forces are taking over. There will be a credit implosion in the eurozone and China. Commodities prices will drop off a cliff in 2012. Gold and silver will be swept down with everything else.
So you sell up your bullion holdings and then wait for the crash and buy at the bottom. You then watch as bullion soars back to the sky. That was a great trade in 2008-9. But only if you got your timing right.
Very few commentators called a bottom in the gold price in April 2009 apart from, with due modesty ArabianMoney. Most people stayed out of the market until the gold price bounced back. Or they failed to accept the sell-signal for gold until the price was already close to the floor.
Those who just held their position through the crisis suffered some big losses on paper but by the spring of this year had doubled their money and more. Since then we have seen another correction in the bull market. Now the chartists assure us we are set for another plunge in the price of precious metals.
Or have we just seen it? Gold has been through a classic 20 percent correction cycle, silver a typical 50 percent retracement from a short-term spike in 2011. Perhaps the precious metals have just had their correction and it is the other financial markets that come next. You could then see some further rebound in bullion prices which now look more attractive to investors looking for relative safe havens.
That is just the micro-view. The bigger picture is the very pertinent observation that market timing a volatile commodity in an uptrend may not work nearly as well as just buying the stuff and leaving it alone. You only have to mistime one or two of the major moves in the cycle and you have losses that will leave you way behind the buy-and-hold crowd. That goes for the so-called expert traders too. A bit of luck can so easily be confused with judgement when none is involved.