Gold's Down $50! Time to Sell?
by Steve Sjuggerud
May 17, 2006
Gold’s lost nearly $50 bucks in just a couple of days, now down to about $690.
Should you panic? Absolutely not.
In the January 2006 issue of my newsletter True Wealth, I wrote about gold after it experienced a similar crash. What I said then absolutely applies right now…
“Most people think gold went straight up from $35 an ounce in 1971 to $800 in 1980. That wasn't the case at all.
Gold absolutely soared until mid-1973. And then it quickly lost a quarter of its value, shaking out nearly everyone. Gold had gone up hundreds of percent by then, so everyone thought the move was done.
But it wasn't...
Gold soon hit new highs in 1974. Then it got obliterated again... falling from about $200 an ounce at the beginning of 1975 to about $100 an ounce by mid-1976. Those that weren't shaken out of gold before were shaken out this time.
Gold started coming back, and the third time was the charm... Everyone had seen gold jump twice now. They finally believed in it by the third time. The general public started clamoring to get in. That's when gold rose above $800 by January 1980, and the coin index rose 1,195%.
The point is, it won't be a straight shot up… It'll be a rough ride, but we'll try not to get bucked off, and give it time to develop.
Then in ten years, when everybody loves commodities and collectibles, we’ll sell… and it will be time to buy conventional stocks again.
Summing up, since the last generation loved stocks, this next generation has to learn to hate them. It'll probably take 10 years.
Of course, it may not be exactly ten years. But that's a reasonable ballpark guess. Based on the size of the boom that we just went through in stocks, and how it captivated everyone, it'll probably take the full 10 years to shake everyone out of believing in stocks, and into believing in commodities and collectibles.”
So gold’s corrected $50 bucks. Big deal. What do we do now? We stick with the big trend…
To me, we’ve likely reached the end of the first leg of the new bull market in gold. There are plenty of signs we’re there…
Gold is finally being talked about. It’s finally quoted on CNBC. And individual investors are just starting to take notice.
It’s about time. I’ve been writing about gold for four years now, and it’s done nothing but go up. Meanwhile, nobody has wanted to hear about it… until now.
So we’ve finally reached the point where new investors will get shaken out (hey, it’s the way things go in markets, I’m sorry). However, I believe much higher prices will come.
In the last bull market in gold, the first “big move” ended in 1973. But much higher highs were ahead. Remember, the bull market in gold didn’t peak until 1980 back then.
Could we have another seven years to go in this gold bull market like we did in the 1970s? Easily…
Don’t get rattled by the action over the last few days. It’s a bull market in gold and commodities. Plan on sticking around for the long run.
Good investing,
Steve
Editor's note: Steve Sjuggerud is a regular contributor to DailyWealth, a free investment newsletter focused on the world's best contrarian opportunities. We write with a simple belief in mind: You don't have to take big risks to make big money with your investments.
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