I make a concerted effort not to drink my own Kool-Aid. Like most asset classes, precious metals run in cycles. Gold and silver will reach a peak and there will come a day to get out. How high will they go before that time comes? I am often asked that very question.
When is that? I don’t know “when” that will be, but I DO know what it will look like when we get there. I will say more about that in a minute. I do have complete confidence that price levels will be a minimum of two or three times what they are currently, representing excellent bargain values at today’s prices.
In determining when we have reached the top, think not so much in terms of a date, or even a price, but rather in terms of behavior. Can’t we all now, in hindsight, see the mania that took place at the top of the housing frenzy when even the Wal-Mart greeter was flipping condos? Or, the dot.com bubble when the hottest tip going was about how to get in on the next IPO of a company comprised of two ex-Microsoft guys with two laptops and one investment banker. That’s exactly what the top will look like in the precious metals market.
Back in 1980 when metals prices were reaching their top, buyers were lined up at every coin store throwing money at the clerks to buy anything they could carry out. There was little thought given to what to buy – as long as they bought something and got in on the action.
Are we there yet? Reliable estimates place the number of buyers in the past five years of physical gold or silver at somewhere between 1.5 to 2.5% of the population while approximately 59% own equities. Very, very few of the people I talk to outside of my 9-5 profession own physical metals. When I speak to groups and ask for a show of hands, very few go up (although I can’t blame them if they don’t raise their hands). I want to tell you – people are not in the market – yet! Take a survey of your friends, family, co-workers, etc. and determine for yourself. You may be surprised at how few actually own physical metals.
So, when everybody, and I mean everybody wants in – only then are we reaching the top. The good news is that at that point there will be something we can buy with our gold – something despised that absolutely nobody wants, such as stocks and real estate (much like gold was not so many years ago.)
Action to take: 97.5% plus of the population has not purchased precious metals. Continue to accumulate at a consistent steady pace. DO NOT WORRY ABOUT THE RECENT VOLATILITY OF THE MARKET! Gold and silver markets are at times very volatile for reasons I have posted on my website. When I was buying gold at $400 it was the same scenario. I welcome every dip as a buying opportunity.
What to buy now: Simple. In gold: US Arts Medallions, Austrian 100 Coronas and 1oz. bars from major bullion banks. In silver: Pre-1965 US 90% silver coin and 100 oz. silver bars. There are excellent buys right now in silver at very, very low premiums.
Quote of the Day: “When paper money systems begin to crack at the seams, the run to gold could be explosive.” – Harry Browne
