Best of the Week
Most Popular
1.Stock Market Crash and Recession Indicator Warning: Extreme Danger Ahead - Harry_Dent
2. Is This How World War III Begins, In Almost Complete Silence? - Jeff_Berwick
3.Trump Wins 2nd Presidential Debate, Betfair Betting Markets Odds Bounce - Nadeem_Walayat
4.Why Krugman, Roubini, Rogoff And Buffett Dislike Gold - GoldCore
5.End of SPX Stock Market Correction Nears - Tony_Caldaro
6.Get Ready for the Future - Exponential Machine Intelligence Mega-trend towards Singularity - Nadeem_Walayat
7.US Housing Market Bubble II – It’s Happening Again! - Andy_Sutton
8.FTSE BrExit Stock Market Panic Crash Resolves towards New All Time Highs - Nadeem_Walayat
9.Can Trump Still Win Despite Opinion Polls, Bookmakers and Pundits all Saying Hillary has Won? - Nadeem_Walayat
10.Gold’s, Miners’ Stops Run - Zeal_LLC
Last 7 days
The Stock Market is an Accident Waiting to Happen - 20th Oct 16
It's Rally Time for Gold and Silver Equities - 20th Oct 16
Cashless Society – Risks Posed By The War On Cash - 20th Oct 16
China's Insanely Leveraged Housing Market Will Enter Its Secular Bull Market In 2017 - 20th Oct 16
Donald Trump Bounces Going into 3rd and Final US Presidential Election Debate - 20th Oct 16
Attention Please: Phase Two of the Gold and Silver Train Now leaving the Station. All Aboard? - 19th Oct 16
How to Successfully Trade a Stock Market Crash - Black Monday October 19th 1987 - 19th Oct 16
Tesla, Apple and Uber Push Lithium Prices Even Higher - 18th Oct 16
Silver, Debt, and Deficits – From an Election Year Perspective - 18th Oct 16
UK Property Market: Slow Growth Does Not Equate To Decline - 18th Oct 16
Trump Election Victory is in Your Power - 18th Oct 16
Stock Market More to Come! - 18th Oct 16
This Past Week in Gold and Silver - 17th Oct 16
A Falling Stock Market Cannot Be Allowed - Financial Repression Is Now “In-Play”! - 17th Oct 16
Commodities, Forex and Stock Market Trend Forecasts - 17th Oct 16
Stock Market Crash..or No Crash? - 17th Oct 16
A perspective on risk rally – Risks abound but Stock Market is Confident - 17th Oct 16
Bank of England Blames Brexit for Sterling Drop Inflation, Masks QE Money Printing Cause - 17th Oct 16
From Piety to Pride to Pity, America's Racial Divide - 17th Oct 16
Is Obama Juicing US Government Spending To Get Hillary Clinton Elected? - 16th Oct 16
Seek Your Independence: Anything Else Will Destroy You - 16th Oct 16
SNL - US Presidential Debates, 1st, 2nd, VP - Like You've Never Seen them Before! - 16th Oct 16
End of Economic Growth Sparks Wide Discontent - 16th Oct 16
Donald Trump on Life Support, May Abandon Election Campaign and War on Republican Party - 15th Oct 16
The Gold Manipulators Not Only Will Be Punished, They Have Been Punished - 15th Oct 16
Black Votes Matter - Is the US on the Verge of Mass Race Riots? - 15th Oct 16
Gold Stocks Screaming Buy - 14th Oct 16
Brace Yourself for the Quadrillion-Dollar Reckoning - 14th Oct 16
The Next Recession Will Blow Out the Budget - 14th Oct 16
John Mauldin: My Infrastructure Plan to Save the US Economy - 14th Oct 16
World War III On The Brink: War Will Continue Until It Triggers Economic Collapse - 14th Oct 16
US T-Bill Rejection At Ports In Progress - 14th Oct 16
These 2 Debt Instruments Pose Peril to Millions of Investors - 14th Oct 16
China’s Rocketing Housing Market Real Estate Bubble - 14th Oct 16
DIY Winter Home Maintenance Money Saving 22 Point Checklist to Get Ready for Winter/Fall - 14th Oct 16
US Stock Market, Big Picture View - 13th Oct 16
Stock Buybacks Main Force Driving Bull Market; Rewards Investors and Starves Innovation - 13th Oct 16
SPX Gapping Down... - 13th Oct 16
Syria - Obama Stepped Back From Brink, Will Hillary? - 13th Oct 16
The Structure and Future of Gold in the Investment and Monetary World - 13th Oct 16
Can Trump Still Win Despite Opinion Polls, Bookmakers and Pundits all Saying Hillary has Won? - 12th Oct 16
Gold and Crude Oil - General Stock Market Links - 12th Oct 16
Samsung's Galaxy Battery Just The Tip Of The Iceberg - 12th Oct 16
Hillary: Deceit, Debt, Delusions (Part Two) - 12th Oct 16
Gold and Silver Metals Show Strength Relative to the USD Index - 12th Oct 16
Announcing Trader Education Week -- a Free Event to Help You Learn to Spot Trading Opportunities - 12th Oct 16
Confirmed Stock Market Sell Signals - 11th Oct 16
Hillary Deceit, Debt, Delusions - 11th Oct 16
Trump Support Crashes to New Low of 6.4 on Betfair Odds Betting Market - 11th Oct 16
The World Is Turning Dangerously Insular - 11th Oct 16
An American Tragedy: Trump Won Big - 11th Oct 16

Free Instant Analysis

Free Instant Technical Analysis

Market Oracle FREE Newsletter

LEARN to Trade

Timing the Gold Price Bottom

Commodities / Gold and Silver 2013 Jul 16, 2013 - 04:15 PM GMT

By: Casey_Research


By Louis James, Chief Metals & Mining Investment Strategist

An interesting thing about the uptick in gold prices over the last couple days is the number of people asking me if I think gold has bottomed. This is somewhat amusing, since we all know that no one can time a market, and the questions are coming from my peers—professionals who should know better.

This reminds me of Doug Casey's famous story about how he bottom-ticked the market in the 1970s: He was a broker at the time and put together an order for a client named Elmer who later reneged on the purchases. So Doug followed his own advice and bought the shares for himself. This happened to be the very day the market bottomed.

Note that Doug did not know that it was the bottom of the market when he made those purchases. He did know that they were good stocks at great prices—the ingredients of any smart speculation.

Another story: Rick Rule of Sprott Global fame formed a partnership to invest in junior resource stocks in 1998 and, undeterred by the "nuclear winter" that gripped the sector for two more years, formed another in 2000. Gold would eventually bottom in 2001, so Rick was clearly early.

Note that being early did not matter; both ventures ended up returning roughly 20:1, and investors made a killing. Rather than fretting about timing the market, Rick simply focused on "buying low."

Key takeaway: not only can nobody time the market, those who have made fantastic amounts of money speculating in this sector didn't even try. They made money buying when valuations were ridiculously low… and simply waiting to be right.

Most people only have the courage to do this with money they can afford to lose—which explains why we call my newsletter the Casey International Speculator and not Casey Safe Investments.

What would we do if safety was our top investment priority? Well, as I wrote after Bernanke's mere suggestion that the Fed might scale back a little on its money printing, it is now plain as day to anyone with their eyes open that "the emperor has no clothes." Gold may take some time to consolidate and rally, but that doesn't make Wall Street a safe bet. We think the safest portfolio allocation under present circumstances would be 50% gold, 50% cash.

But preserving wealth is not our only goal here at Casey Research. For many of us, readers and colleagues alike, it's not even our top priority: we want to make money—lots of money. And it is our view that the recent market volatility is evidence that our projections of more economic trouble ahead were and are correct. That means our overall strategy is correct and remains intact, which in turn implies that the current selloff is a buying opportunity. Hence, we still recommend our basic allocation model of 33% cash, 33% gold, and 33% equities that should do well in times of crisis.

So, while no one can say when the bottom for gold will be—not until it's obvious to all in our rearview mirrors—I can tell you that there are great speculative picks available now that offer the same potential as Doug's picks back in the mid-'70s correction and Rick's back during mining's nuclear winter.

I for one plan to make the most of what will follow the bottom, as surely as day follows night. I have bought shares on the previous downturn, so I bought bullion in response to the most recent selloff. As an anecdotal aside, I found that premiums are up and supply remains an issue in my local market.

Some of my fellow editors here at Casey Research have been placing stink bids on good companies. It's a nice way to redeploy profits from those GLD "gold insurance" puts that worked out so well for us when gold dropped. Note that this does not mean prices can't or won't go even lower in the near term. All I'm saying is that some of us here at CR are happy to add to holdings at today's prices.

But if this is the bottom, won't we miss the best prices in ten years? Absolutely. The questions I'm getting about this suggest a shift in the risk-reward perception in the industry—perhaps a new willingness among professionals to get back in to the market. That could become a self-fulfilling prophecy for the next leg up.

Or gold could just get whacked again the next time Bernanke opens his mouth and pretends the government has the courage to do any of the right things.

This brings us full circle. We don't need to tick the exact bottom of the market; the second-best prices in ten years will still be pretty darned cheap—and much lower-risk. It will take time for such a skittish market to believe the bottom is in. There should be plenty of time to take advantage of good deals.

So let me be clear here:

  • I am not calling a bottom.
  • I am saying that we have opportunities worth taking advantage of now, regardless of exactly where the bottom is—just as Doug has done many times over the years.

That is not a prediction, but an assessment of the situation.

If you have cash to speculate with—if you're still building your portfolio during this correction—don't be afraid to "buy low."

Of course, there's more to earning outsized profits from precious metals investing than just buying low. Knowing which of the juniors are most likely to have a solid resource and a team capable of developing it—or to score big by being bought by a major company—is a vitally important element of successful speculation. You can do the research and due diligence yourself... or you can give Casey International Speculator a risk-free, 90-day trial. Not only will you learn our recent recommendations—including "best buys" and price guidance—but you'll have access to every back issue, as well as free reports for subscribers and our resource dictionary. Learn more and sign up today... before this opportunity of a lifetime slips away.

© 2013 Copyright Casey Research - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Casey Research Archive

© 2005-2016 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife