hang in there gold people

Mr parrot posted this on the gold forum.I am sure he doesnt mind me using it here since were on ignore,lol.


Hope this post is some help.

With gold around US$890 (as I type this it is now $897) many investors here and overseas in gold stocks have been capitulating.

They have given up on their gold share investments in a follow the leader manner, helped in my opinion by some suspicious selling of gold shares, due to the very poor recent performance of gold shares compared to the gold price.

For example, a sector leader like LGL has fallen 30% or so since October last year despite an excellent rise in the price of physical gold.

Seeing this sort of bizarre stuff happening many investors have capitulated and decided that nothing will make gold shares move. We've even seen a number of posts to that affect on this forum.

This is typical investor behaviour imo - selling out of the gold sector at what has to be bargain basement prices when the outlook for gold remains fundamentally strong and gold has only corrected about 5% from its 28 year nominal US dollars high (forget about inflation adjusted which is well over US$2000.)

Now while we have had all this recent market mayhem and a continued very disappointing performance in gold shares this year considering the rise in the price of gold, I realise from the lessons of history that this will not continue forever.

The lessons of history also tell us that many investors will usually have bailed out of gold shares before a substantial rise in gold shares and then will buy back in at the peak.

I suspect we have been seeing this investor behaviour again.

Gold right now is US$897.00. The longer gold stays over US$850 or over US$875 the higher the chances that there will be a substantial catch up rally in gold shares.

At times recently I personally have felt like bailing out of all my gold stocks and never touching gold shares again. But I realise when I feel like that I am being irrational and emotive.

So I take a deep breath or two and think logically, putting all emotion aside.

So what I have been doing is rebalancing the respective weightings in my portfolio of gold shares. Such as selling a percentage of my holdings in some gold stocks, even though they may be at potentially firesale prices, in order to purchase other gold stocks that I also very much like.

When the fundamentals are so outstanding, then the lessons of history mean that gold shares MUST rise with a continued strong gold price.

That means I absolutely refuse act on emotion, no matter how tempting it is to act emotionally, because of a temporary disconnect between the performance of gold shares and the gold price and bail out of gold shares per se when the gold price is so strong and many gold stocks are priced for US$500, US$600 or US$700 gold at best.

By the way, as trading was opening this morning I was on the way to having a few chamomile teas. Very good to help you relax and think more clearly!