SHINE ON YOU CRAZY METALS!

GOLD AT 25-YEAR HIGH, SILVER AT $14 PER OUNCE

Gold is considered by many to be the ultimate default currency. In times of war, hyperinflation, or other major disruption, gold prices soar. When times get tough, when oil prices vault, many retreat to the safety of gold. In January of 1980, gold hit $870 per ounce. Also in January of 1980, the DJIA fell from 875 to as low as 820.

In September of 1980, gold reached as high as 730 before slipping to $700. And gold, which has been as low as $250 in September of 1999, is within a hair’s circumference of $700[i].

TRAIN KEEPS A ROLLIN’

Is gold too high? Will gold keep rising? The Author does not know. Remember, he is a relative strength, momentum based investor. His charts tell him that gold will lose technical support at $605 per ounce. That is a long way to fall, so protect your gains if you have them. Put in stops to protect some of your gains at percentage gains you are comfortable with.

FOR EXAMPLE

Let’s say we bought gold at $605 per ounce.[ii] Gold will lose technical support at $605, so if we allow our gold holding to fall to technical support at $605, we break even. And nobody wants to do that. Nobody ever lost money (sleep perhaps, but not money) by taking gains.

Right now, with gold over $690 per ounce, we have a gain of about 14%. So we want to protect most of that gain. One tactic is to put a stop loss order at $675. That locks in an 11% return. You could protect your entire portfolio, or protect only half of it with a stop-loss order to sell only half of your gold holdings.

If gold does fall to $675 and you take an 11% gain on half of your gold holdings, you can put in a lower stop loss order on the remaining gold. If it rallies, you participate in the gains. If not, you have downside protection.

YOU NEED INVESTMENTS THAT ARE GOING UP IN YOUR PORTFOLIO

Is it too late to get into gold investments? Again, who knows? Gold is in a fast trend upward and trends tend to continue, until they no longer continue. Double speak, gibberish? Smarmy remarks? No, just all the Author can say about future gold price directions. We don’t predict in the Desert of the Real. We let the market tell us what to buy, when to buy, and when to sell. There are those geniuses that can sometimes correctly predict market directions. We cannot and don’t pretend to. We follow our charts and our methodology, make gains, avoid losses, and we beat the snot out of the indexers and the portfolio pie chart people.

But since gold is moving higher and has relative strength against the overall market, there is ample reason to buy, or keep buying, gold. When it falls, we will sell it and look for the next investment.

IMPORANT DISCLAIMER: This post is offered for informational purposes only. Sources of information provided are believed to be reliable, but are not guaranteed to be complete or without error. Opinions and suggestions are provided with the understanding that readers acting on information contained herein assume all risks involved. The Author may or may not buy or sell securities discussed in this blog.

WE CANNOT OUTSMART THE MARKET IN THE DESERT OF THE REAL. WE JUST LISTEN TO WHAT IT IS TELLING US AND STAY ON FOR THE USUALLY PROFITABLE RIDE!

[i] “$700 Gold: Want in, Think Twice”, http://money.cnn.com/2006/05/09/pf/gold_investing/index.htm?source=yahoo_quote
[ii] The Author owns gold in IAU, an exchange traded fund. Each share of IAU represents 1/10 of an ounce of gold.