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Guest Post: When To Sell Gold
By Terry Cozon Of Casey Research
When to Sell Gold
By now you have plenty of reason to congratulate yourself for having boarded the gold bandwagon. The early tickets are the cheap ones, and you’ve already had quite a ride. The best of the ride, I believe, is yet to come, and it should be very good indeed. It should be so much fun that your wallet may start to feel a bit giddy – which can be dangerous. So it would be wise to consider, now, how things will be and how they will feel when the current bull market in gold reaches its “end of days.” Because it will end.
Buying at the right time is the key to building profits. Selling at the right time is the key to collecting them.
The 1980 Peak
In 1980, gold briefly touched the then record price of $850 per ounce. In terms of purchasing power, that would be $2,400 in today’s dollars. And for the value of the world’s entire gold stockpile to attain the same share of the world’s total wealth that it represented at the 1980 peak, the price would need to reach $5,800 per ounce.
But so what? Before you can look to those numbers for guidance about what the peak in gold’s bull market will look like, you need to consider how the process that drove the earlier bull market compares with what is happening today.
The earlier bull market was driven by price inflation in the world’s reserve currency, the dollar, that reached an annual rate of 14%. The more expensive it became to use dollars as a store of value (i.e., the more rapidly the dollar’s purchasing power was declining), the more attractive gold became as an alternative way to store value.
The dollar is still the world’s reserve currency. (And not just for central banks. Among individuals and private businesses that want to diversify out of their home currency, the dollar is still Number One.) And the force driving the bull market in gold is once again price inflation. But this time it isn’t actual price inflation that is on the mind of gold buyers around the world. It is the potential for price inflation that is building up. That build-up is coming from:
- Rapid expansion in the U.S. monetary base through the Federal Reserve’s asset purchases. Most of that expansion has yet to be reflected in a growth in the U.S. money supply. It is still sitting, like a charge in a capacitor, waiting for something to set it off. There was no similar liquidity bomb stored in the U.S. economy's closet during the years leading up to 1980.
- Unprecedented growth in federal government debt, which adds to the political attractiveness of price inflation. There were federal deficits during the 1970s, but nothing like today's – just enough to give the party out of power at any time something to talk about.
- The accumulation of U.S. Treasury debt and privately issued dollar debt in the hands of foreign investors. U.S. debt to foreigners wasn't a factor in the years leading up to gold's 1980 peak. This time around, it could be a powerful force for accelerating inflation. Even moderate inflation could spook foreign investors. Their sales of Treasuries and other dollar-denominated IOUs would push down the foreign exchange value of the dollar, which would raise the cost of imports coming into the U.S., which would further stimulate price inflation. A nasty feedback.
And foreign holdings of U.S. debt operate as a second vector feeding the political attractiveness of dollar price inflation. Depreciation of the dollar can be framed as a clever way to shortchange foreign creditors. "It hurts THEM, not US" would be the slogan.
All those factors are working to make price inflation distinctly more severe than it was in the 1970s, which argues for a higher peak price for gold. When the metal does surpass its 1980 peak in purchasing power, the event is likely to be widely reported in the press. I suggest that you not attach any significance to the event. It won't be time to sell.
Sell Signals
But the time to sell will come. Here are the signs I'll be looking for.
Gold and gold-related financial products will be commonplace.
Even today, most financial institutions still hold the "barbarous relic" attitude toward gold. Yes, you can get GLD through any stockbroker, but with a few exceptions, the brokerage firm's heart isn't in it. They offer GLD for the same reason even the best seafood restaurants have a steak on the menu – they know someone will ask for one, even though that's not what they are in business to serve.
Before the bull market is over, that attitude will change. Mainline brokerage firms won't just have gold-related products available, they will advertise them. They will boast about them. They'll claim to specialize in them. And it won't be just the brokers. Your local bank will offer gold-related CDs. Your insurance company may be offering life insurance denominated in ounces.
Gold going mainstream won't mean that the bull market is over, but it will be a sign that it's getting long in the tooth. An early warning signal.
You'll be hearing gold chatter wherever people talk about investing.
The inhabitants of Financial News TV Land will be talking about gold approvingly, and each of them will be trying to suggest he was early in recognizing the gold bull market [TD: such as Jim Cramer who now has gone apeshit over gold - if there ever was a sell signal, this is it]. You won't be able to get through a golf game or a cocktail party without someone talking about gold. Even your brother-in-law will want to explain it to you.
The gold standard will become respectable.
Today advocates of the gold standard are seen as standing to the good side of whacko, but not by a big margin. But as gold attracts more converts in the investment world, the politicians will want to associate themselves with it by proposing some brand or other of gold convertibility for the dollar. Respectability for the gold standard will be a sign that a majority of the people who are going to buy gold already have.
Other things will look cheap to you.
When gold nears its peak, even if you suspect that that's what's happening, you won't feel certain about it. But when you start seeing investments – probably conventional stocks – that look like strong bargains, treat those sightings as a sign it's time to start selling gold. You know the reasons that led you to buy gold. If you are tempted to sell part of your holdings to buy something whose low price seems to give it better prospects, then you probably will be selling at the right time. You could be selling to the last new buyer.
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Sell when Cramer says to buy
Sell when Natgas hits some beta
Sell when everyone at ZH says not to.
No offense guys but think about this logically without prejudice. Cramer has always been a cycle top indicator.
Natgas for whatever reason is becoming a counter trade to gold/silver - watch it.
When everyone at the bar is a genius then the time to slowly liquidate is near.
Liquidate into what you ask? Houses will be much cheaper and will be near a cycle bottom, Swiss franks (the new old reserve currency), natgas investments (again cycle bottom it seems), whatever else floats your boat.
Gold is not an investment to us, it is nothing but money, a tool, a way out. It is not sold it is used to buy safety in times of extreme zombie crisis.
This is not your grandfathers depression so the answers will depend on each person's risk tolerance, belief system, and other environment variables no one has seen yet (i.e. further policy response from the squid team) of safety or investment.
There is no crystal ball - only history. Everything else is BS.
Folks, there is no fear here. THAT! makes me nervous.
I am bigger gold bug than most here. I own a great deal from previous generations plus my own investments and we never sell. But, it was purchased over the decades for the protection of next generation.
The only time any of my family wil sell is when we have to bribe the prison guards to escape or bribe someone to get on a boat/airplane.
(I am serious).
Good luck and prosperity to all. Keep a clear head - it will tip at some point.
The easy answer is this... when there is actually a default will be the time to sell gold. A default is the destruction of money. When that happens, then you sell it.
i would like to buy physical silver, and sell silver on the markets . how is the best way to do this and how much in percentage does it cost to hold this "hedge"? thanks for any advice.
You asked for advice: If you don't know how it works, you shouldn't be doing it. If you have to come here for instructions, you're going to get little.
Wow, Rocky, rude flag on the field!
Johny2, For what are you buying and selling silver? Understand that silver is golds little brother and as such has many of the characteristics of gold. So it really depends what your purpose is.
I'm in for the long run. Gold & Silver is my savings account be it up or down. No line on a tax form for interested accrued. 5000+ years of use as a storage of value is compelling enough evidence for me to stay the course.
sounds like NASDAQ 1999 ding ding ding
Keynes?
Do not be shook out measuring against a zombie. The current system is 'dead dollar talking'. The attorneys for the accused now meeting in the judges chambers to work out mistrial. Lots of emotional claims of innocence, pleading, bawling, defiance, etc etc. Later expect apparitions of full acquittal. LOL.
Don't be fooled, there is no way to dismiss the current economic imbalances short of starting over...which is why the FED is being so cavalier with QE. New currencies take years. Euro planning took over a decade although I don't expect that long. The point being; slow capitulation full of extreme twists and turns. The blow off top is years away.
No need to have a serious discussion at this point in time. Be careful day trading doesn't creep into your decisions regarding massive global currency reorganization.
.02
The best time to seel gold would be when fear and confusion is at is peak, when people have doubts about the safety of their money in the bank and the safety of their currency.
But I wonder that if there are massive crashes if it will bring everything down with it, including gold and silver. But then again if people are selling everything out a great many of them may seek the safety of gold because of the fear of 'bank holidays' and the future of the currency.
So I gather gold and silver will dip with evreything else in the first instance but should rebound again fairly quickly.
The problem of trying to sell at the best possible time is where do you then put your cash as that time is likely to be the worst time to have your money in a bank, currency or stocks.
So the best time maybe after the SHTF and when it seems there is light at the end of the tunnel or you know your bank is safe.
I have gold, silver and gold and silver stocks.
Now wondering how the Aussie market will go monday.
"Buy when there's blood in the streets...even if it is your own"--Barron Rothschild.
You'll know it's time to sell gold when:
Your brother-in-law is Chinese
You're speaking Mandarin on the golf course
You're shoe-shine boy tries to sell you two grams of gold, not cocaine
The president of the United States lets the Chinese premier borrow AF-1
Goldman Sachs says gold $30,000 is right around the corner
Almost there then..
You'll know it's time to sell gold when:
Your brother-in-law is Chinese
(he is)
You're speaking Mandarin on the golf course
(I have done so, though not well)
I awake on a dusty mattress, reality slowly seeping into my mind like the sunlight dappling through tattered window coverings. I arise and take stock of the situation: a warm Fall day (will be snowing soon and too quickly), two knives sharpened to a lifesaving razor (one for the hip, one for the boot), an oiled and loaded 9mm semi-automatic Beretta with the safety disengaged, a worn but stable wood axe, two water bladders (half-full), two days provision of corn hard tack in a zip-lock baggie, a metal flask on the other hip, a jacket, water proof boots, and a belt of metal worn at all times next to the skin. The day plays out in my mind, the grifting from foreclosed husk to abandoned public center to car lot graveyard. Weaving through the camps of the crazed monetarists, the tell tale signs of the cannibal banker gangs (bones, bones, a sea of bones from the unlucky and unwise), the cult of the prophet Bernake sweeping through the rubble for undisclosed incomes. It would be tricky this close to the zone, but the last week was anything but a walk in the park.
A chilled breeze creeps in through the bare pane sending the coverings out in a gentle wave of ripped fabric and spider webs. I rummage about this house and locate a safe ripped from the hinge and filled with stacks of bills. Perfect. I break up a three legged chair with the axe and stuff the pile loosely with greenbacks. A matchstrike and the dusty bills ignite, warmth and flame creeping up the wood and chasing the night from my bones. A found pan, warmed tack with warm, a sip of the too precious whiskey, and it's time to move on.
I drift out amongst the wreckage of the 'burbs, moving slowly and cautiously but ever forward. Through the danger, over (or under) the zone wall, past the barricades, into the heart of the beast. There is a shop at the center of the zone, a fortress of sorts, allowing investment in a "market" based on the Pain. The Pain, our only surviving currency that you can't eat, drink, screw, or shine. This market invests in the outlying supply shops and security details, paying dividends in Pain 3 times a year. I feel the weight of the belt strapped across my chest and back, the comforting ounces of metal that have seen me through this hellscape of dashed hopes and constant insurrection. Today I'll make it into the zone, today I sell my gold.
-Diary of a survivor, discovered in 2083.
ha, beautiful. Is this original or part of a yet unread (by me) larger tome?
Nope, that's it ;)
I don't think we're in a gold bubble.
around town more of those 'we buy gold' shops are popping up. one of my wife's friends just held a gold party where they all sold their gold for a fraction of its value.
I caught dave ramsey berating gold as stupid and dumb...moments later he went to commercial shilling for one of those cash for gold companies.
when I see the masses go from sellers to buyers....then I will raise an eyebrow. Big picture I don't ever see myself getting rid of my physcial....it goes to the kids.
By the way, it's Terry Coxon, not Cozon.
Buying some PM is necessary. How about Goldmoney when U are an expat ?
Do you guys know anything about that company ??
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