Don’t Lose Your Position!
By: John Fisher Gold prices seem high on a nominal dollar basis. Some of my clients are tempted to sell now, take profits and buy back at lower prices. Don’t lose your position! They are either nervous or are attempting to out-smart the market. If you are considering the same, don’t do it! In essence, this is market timing at its purest.
Market timing never works. I have succumbed to it in the past. I failed to resist the temptation to sell gold or silver today and buy back that same amount at a lower price in the next few days, hoping to profit by doing so. I have been stung at least 80% of the time – maybe more.
Today, anytime I draw down my inventory, I replace it immediately with no regard for the prevailing price. That is also what all the large wholesale distributors do – they never gamble on a higher or lower price with the hopes to profit.
The bottom line – if you are in the gold and silver market for the long haul, never deplete your position. You may change forms from gold to silver and vice versa, buy always maintain your core position.
I find it easiest to measure my core position by reducing my silver holdings into their gold equivalent, and then adding the two. To do this, I take the price of gold and divide it by the price of silver. This yields the gold to silver ratio reflecting the number of ounces of silver it takes to buy one ounce of gold. Next, take the number of silver ounces you hold and divide that number by the ratio number. You now have the gold ounce equivalent of your silver holdings. Add this gold ounce equivalent number to the ounces of actual gold you hold, and you have your total holdings measured as gold ounces.
For example, assume you have 1,000 ounces of silver and 20 ounces of gold. The calculation would look like this:
- $1800 gold divided by $40 silver = 45 (the gold:silver ratio)
- 1,000 ounces of silver divided by 45 = 22 gold equivalent ounces of silver
- 22 gold equivalent ounces of silver plus 20 ounces of actual gold = 42 total gold (equivalent) ounces.
As the price of gold and silver change, the ratio will also change. Just monitor your total gold ounces and attempt to maintain or grow them. If the number is declining, your position is eroding. It’s really that simple!
All Things Considered – John’s Commentary
As I shared in my article last week, most people are not in the physical gold and silver market . We are NOT in the final phase of the bull market yet and their is ample time to secure your position.
Quote of the day: “Start buying gold now, regardless of the price. By acting now, you will not have to react when it’s too late. Too late will be when the majority of the public finally figures out what is happening to paper money and frantically tries to get aboard. Remember, if you’re one of the ones holding paper in the end, you will have given away your products and services for nothing.” – Robert Ringer
