Should I Buy Gold Kong?

I get this question a lot – a whole lot. Should I buy gold? Is gold going back up?

Interestingly, if you zoom out to a much longer time frame chart (maybe a weekly and even a monthly chart) you’ll see that Gold has suffered recently – yes…..but is “still” in an uptrend (pending it slows down and looks to reverse in and around this area sometime soon).

I would have to consider 1155.00 as a level of considerable importance and significance.

But please keep in mind (as we’ve discussed with respect to long-term charts) that turns on a weekly chart can take “literally” weeks, and weeks to stop then consolidate and finally turn to reverse course. Even at that ( considering we are looking at an asset that costs 1190.oo dollars) a hundred dollars here, a hundred dollars there – these aren’t “large swings” percentage wise. Putting an exact number on it is a fools game.

More important than the question of “should I buy gold?” would be the matter of “how do I buy gold?”

Don’t charge in there looking to call it a “trade” as you’ll likely miss on nailing an entry, but rather “build” a position over time “smoothing out” this volatility and not sweating the 50 buck swings.

Patience is your greatest asset here. You really can’t rush this one.

6 Responses

  1. Superpositron (@superpositron) June 29, 2013 / 12:42 pm

    A friend (non trader type) had been ‘building’ a position all the way from the mid 1650s. Like many (and for a time i would include myself) he got sucked into the gold religion and hyperinflation thesis of $5000 gold by 2017. Unfortunately, rather then choosing the pain of taking a loss after gold kept falling through each floor, he chose to pour more money into his account to meet his margin calls and for a time, urged on by the likes of was still adding to his position. Friday when gold futures printed a new low he finally threw in the towel and closed his position with an unspeakable loss. He messaged me and broke the news at the same time telling me despite the enormous damage his account had suffered he was for the first time quite relieved. After hearing this given the convergence of this news and the tiny area of resistance it had formed i decided to take a small position in gold at a rather good price. I was lucky and im not gloating. It hurts me that he destroyed himself. I wont tell him he influenced me in going long out of respect.

    There are still a lot of religious gold bugs out there (mostly retail types) who have inflicted enormous generational damage to their personal wealth. In a way they are now more then ever forced to believe in gold because they are dead if they dont. What’s disturbing still is you get the gold lobby, the Erick Sprotts, James Turk, Gary Savage and Jim Sinclairs of this world that still pump out their absurd newsletters which have become more and more like crazed ranting mostly declaring conspiracies against the gold bugs. Whats unfortunate is that most of the people that got sucked in are just normal 9-5 job guys wanting to make some money who subscribed to gold newsletters when gold was going to the moon. Separately i know i guy who even convinced his mother in law to put half her retirement fund into silver at around $34. He told this to me last week and i was absolutely speechless.

    Anyway i just thought i’d have a vent. Everyone listen to Kong and respect your stop losses and dont get sucked into a religion. Stay agnostic. 😉

    Confucius says: He who picks bottoms has smelly finger.

  2. schmederling June 29, 2013 / 1:53 pm

    I would say the Fundo’s for the PM sector have not change – one either choses to believe things have turned the corner with respect to the global situation or it’s just been propped up & sustained by the Fed. The entire market is now under the management of the Fed, however bonds will not be manipulated forever…… the laws of the market will not allow long-term intervention without huge repercussions.

    Look at how WTI has been holding up relative to the action in the PM sector – rather well & gaining might I add….. reaching $100 is around the corner as WTI sniff’s out the cracks in the system….. The PM sector will once again receive the MF which have left – in an attempt to chase gains in the stock market….. Could this be the BOTTOM? sure could & we could also fall a little further but not much left – huge short-covering will soon spark a rally that will blind-side the MSM & most.

    I personally prefer silver – but one needs to have conviction with the trade as the volatility will surely increase ….. I expect the gains in Silver to outmatch Gold’s …… I do not believe the bull is dead….as inflation is rapid in plan view – the writing is on the wall for those who care to look….. buying opportunity ….. one of few in this run…. only the 2nd real low now & in 08…

    Best of luck to all…

  3. Superpositron (@superpositron) June 30, 2013 / 4:54 am

    What’s interesting to me is that the value of gold is completely a social construct. We have decided that a piece of shiny metal with very little industrial uses is worth something. Its just traditionally like that. I’ll happily trade and take positions in it. I wonder, in order for the world to live harmoniously within a FIAT money system, gold needs to stay out of favour? At least its a cocktail discussion. Don’t get me started on diamonds which are a complete scam.

  4. Power Corrupts July 1, 2013 / 7:27 am

    Superpos – The value of practically everything is a social construct isn’t it? A hammer has value because it can bang in nails, it has unique characteristics that make it very effective in that usage. It’s not much good for anything besides banging. The same can be said for most other tools. For millennia, gold has served as a tool to store value, precisely because of its unique characteristics. Its not much good for anything else, but unlike hammers and fiat currencies, the supply of new gold is not easily increased. Unless one wishes to ignore the reality of fiat creation in today’s world, gold’s continuing role as a useful tool appears assured.

    • Forex Kong July 1, 2013 / 9:01 am

      I agree 100% with respect to Golds use as a store of value in a broad stroke , and considerably long term capacity. The damn thing is – most traders (even mid term investors) are generally looking for returns “within a time frame they can get their heads wrapped around”. Even 6 months, a year is a period of time where the average guy might be able to tie up a couple grand – and hope to see “something in the green” at some point along the way.

      This last wash out / dip in gold has done an excellent job of washing out the weak and the “relatively poor” who don’t have the near term means and just can’t hang on through it.

      I’d love to buy , buy , buy in a general sense but just cant tie up the capital.

    • Superpositron (@superpositron) July 2, 2013 / 4:28 am

      I dont necessarily disagree. So a hammer has value because of its use. Someone got the raw materials together and essentially you pay for the material, labour and storage costs (its on a shelf in the shop) and branding and what have you.

      Gold more then the costs of mining and smelting you are paying for nothing else really. Same can be said for diamonds.
      Now the unique characteristics of gold is that its shiny, rarer and soft. The Egyptians believed gold was the skin of the Gods and for many thousands of years its been seen a valuable only because of tradition. Sea shells used to have value. For a time pepper was more valuable then gold and so where Tulips.

      I think all im saying is that who knows what the future may hold for gold. Traditions die. GOLD never existed before in a FIAT currency system. Maybe in order for our system for all its flaws to continue gold needs to slowly move out of the minds of people.

      Im only playing devils advocate here. Im long gold. 🙂

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