It's officially summer, happy July Gold Why readers! Thanks so much for all the
great questions. I have gotten a ton of Gold Why questions and have a backlog of several hundred. I'm slowly but surely
going through the questions and prioritizing as best as possible. If you have asked a question, I want to sincerely thank
you - it means a lot! If you have asked a gold question that has not yet been answered, I recommend becoming a
Gold Why Facebook Fan and asking the question on my
Facebook page. I am giving questions on Facebook priority since it's so easy to answer them there.
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If you've been reading Gold Why for a while, you probably know that I have a
gold price page and also talked about my
gold price predictions for 2010. With the
current price of gold hovering around $1,544 we are certainly having an outstanding 2011. The price is going up so
fast that one Gold Why reader is wondering if he should wait or purchase now. Today, I'll talk all about when you
should buy gold! Here's today's Gold Why question...
Question: Are there any indications appearing in the horizon for Gold price to decrease?? I mean, in my country,
since 5 yrs, the gram of the Gold was nearly around $15 and NOW it is around $30... (Note from Gold Why: I received this question
back in 2009 and am just now getting around to it so prices are even higher now.) While the rise is beneficial to some people,
others want to BUY gold but a LOWER PRICE...
Answer: I really love this question because it's all about when to buy gold. Here at Gold Why, I spend a ton
of time taking about why I feel gold is a great investment. (Disclaimer: I'm not a licensed investment advisor.) That said,
I have not spent as much time discussing when it's the best time to buy gold. Even though it hasn't been a huge topic of
discussion, I have very strong opinions around timing the purchase of gold, silver, and copper bullion. Today, I'll share my gold
It's All About Dollar Cost Averaging
My investment roots are in dividend reinvestment plans (also known as DRIP plans). Such plans allow you to buy stock
directly from companies, invest small amounts on a regular basis (say $100 per month), and reinvest all dividends for additional
fractional shares of stock. One of the biggest advantages of dividend reinvestment plans is the ability to dollar cost average.
What does this mean? Basically, your purchase price gets averaged over time (usually working out in your favor). If you buy a small
amount of stock each month for many years, your purchase price is the average of all your purchase prices. You will buy the stock
when it's high, but you'll also buy when it's low. Because it's so very difficult to time the stock market, dollar cost averaging
is a truly amazing concept. I like to keep my emotions out of my financial decisions and dollar cost averaging has afforded me this
When it comes to gold, I carry over the exact same dollar cost averaging mentality. It's all about establishing your position over time.
Yes, the current price of gold is high compared to where it was a few years ago. It's my opinion that the long term trend is up. I don't
think too many people reading this article would disagree with that. However, I'm sure there will be dips on the way up. Will the price
of gold dip from here before reaching the next plateau? I really don't know. What I do know is that some level of volatility is to be expected.
As such, I recommend continuously buying gold. Once you decide that gold is the right investment for you, create a monthly plan so
you are constantly accumulating a larger and larger position. If you are on a limited budget and can't splurge for a full
Gold Eagle each month, don't worry. You have fractional gold bullion coins at
your disposal. Moreover, some really great gold dealers (like
Blanchard) offer programs where you can
invest a fixed amount of money each month and then take delivery of your coins when enough money has accumulated. The benefit of this is
you are dollar cost averaging into larger gold coins (one troy ounce coins) even if you don't have enough money to buy a full large coin
in the short run.
Buy Gold On Dips
Once you have your dollar cost averaging program in place, stick to it. Let's say that in addition to your dollar cost averaging, you have
a little extra money left to purchase even more gold bullion. That is a truly fortunate position to be in! In that case, I recommend also
accumulating on dips. Keep your dry powder ready and when the price of gold starts tanking (and everyone else is selling), go in there
and pick up a few extra coins. This is a great strategy that will help you lower your average purchase price of gold. The only challenge
with this strategy is it requires a lot of dedication and a strong willed mindset. It's not easy buying when everyone else is saying sell!
Buy Gold Before Big Events
In addition to the strategies just mentioned, I also recommend buying gold bullion before big events in your life. Let's say you're
getting a new job. Let's say you're buying a new home. Or, having a baby.
Gold brings good luck. This is hard to understand if you've never
held gold bullion coins in your hand (especially larger one ounce gold bullion coins). Once you have held gold bullion coins in your hand,
however, you will quickly understand their magical power. They are magic and bring luck. It's important to stack the odds in your favor
and that's why I buy coins before big events. (I also believe giving to charity brings good luck and I also tend to donate money to charity
before large events in my life.)
It's Ok To Buy Small Amounts of Gold
Now, this may all sound a bit overwhelming. If you follow all the tips and strategies above, you'll be buying gold on a really consistent
basis. You're probably thinking, how is this possible? I'm going to run out of money! The absolutely critical point here is no amount is
too small. Let's say you only have $20 each month to invest. That is ok. In that case, maybe you stick to silver. Or, maybe you save
for a few months and then buy a small, fractional gold
coin every few months. I'm a small time investor, but have built a sizeable gold portfolio over time. It's all about the dedication and
longevity, more than the amount of money you have to invest in the short run.
When Should You Sell Gold?
So, we've been talking about when to buy gold, but you may be thinking, when should you sell? I love this question because I have a very
strong opinion about it. In short, I feel gold is headed much higher and that there is no good time (in the short run) to sell. Perhaps
in 10 or 20 years, when the price of gold is at $5,000 or even $10,000 per ounce, then I'll consider selling. At that point, it may be possible
to take some serious profits off the table and perhaps even
pay off my mortgage in gold coins. However, pending
$5,000 or $10,000 per ounce, I'm holding onto my gold as part of my balanced investment portfolio. Gold is my hedge against inflation and
insurance against inflation. It's my financial security and the reason I can sleep at night. If I were to sell my gold, I would not be able
to sleep at night, and for that reason recommend holding on! (Again, not an investment advisor, and this is just my personal opinion and for
your entertainment purposes.) Hope this helps and gives you some insight into my unique perspective on the amazing yellow metal we all love so much.
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