Before one every buys a single troy ounce of gold and silver, one should ensure first and foremost that one understands that gold and silver are volatile in price every single year. Many people commit the same mistake in buying gold and silver that they commit when buying into the stock market – they don’t buy assets when asset prices are low, and only buy them after prices have soared and news of a steep short-term climb in price has been reported by the mainstream media news. However, an even bigger mistake gold and silver purchasers make is not having enough patience to benefit from the long-term trends higher. So to sum up the mistakes people make when buying gold and silver they are:
(1) Not understanding that volatility in gold and silver markets does not equal risk when one knows how to interpret the volatility in these specialized assets correctly; and
(2) Not having enough patience.
These two concepts go hand in hand for the following reasons.
As the fraud of the global fractional reserve banking system is now beginning to be understood by more and more people for the first time in a century, the volatility of gold and silver prices will increase due to the war that is going on between (1) the people that wish to protect themselves against the ongoing fraud of the global financial system and (2) the banking cartel, for the simple reason that these two segments reside on the opposite sides of the price spectrum for gold and silver. The people wish to purchase physical gold and silver as a means of protecting their purchasing power, while the banking cartel wishes to suppress gold and silver prices as rising gold and silver prices expose the fraud of their fractional reserve banking system. Thus, bankers periodically manufacture steep declines in the prices of gold and silver through their naked short positions in the gold and silver paper derivatives market that include futures and very likely the GLD and SLV ETFs as well. This constant tug of war between good and evil causes massive volatility in the prices of gold and silver as these two precious metals are the kryptonite of the global banking cartel, and low prices in gold and silver are essential to the perpetuation of banking fraud.
Though there has been lots of volatility every year during the current 11-year bull market in gold and silver, lots of people every year never wait for low-risk, high-reward entry points and always get on board the gold and silver bulls, not during the quiet periods, such as the one that has existed for the past few months, but only after they have already generated lots of momentum. And when this happens, we witness lots of retail clients buying gold and silver at or near the annual peaks every year, behaviors that make them ripe for the plucking by the banking cartel. Since 2006, at maalamalama we’ve been advocating our clients to heavily overweight their portfolios with gold and silver when silver was still $9.00 an oz and gold was in the $560 to $580 an ounce range. Obviously our clients that have been stacking physical gold and silver since 2006 have stupendous average prices for their gold and silver today. Still, we haven’t been perfect on calling the bottoms and tops of gold and silver every year for seven straight years as such a feat is literally impossible except for the banking cartel members that artificially manufacture the massive (and increasing) volatility in gold and silver every year. And this is where the patience factor again becomes paramount in building wealth with gold and silver.
For example, on April 25, 2011, as silver was soaring, I distributed a private bulletin to maalamalama clients and stated: “One thing I can guarantee you is this: the bankers [are] looking to take down gold/silver this week…I’m 100% sure that the bankers will immediately try to take down gold and silver prices at NY open.” That very day, April 25, 2011, silver actually broke the $50 an ounce barrier in Asia, and even on the COMEX, silver reached its high price of the year, $49.82 a troy ounce. However, that same day, the banking cartel hit the silver price just as I predicted before market open that day in New York, and mercilessly hammered the silver price 8.7% lower before finally recovering a little bit into the market close and closing 5.7% lower from the same day highs in Asia. As silver continued to fall over the next few weeks, I sent another private bulletin to my clients on May 12, 2011 that stated, “my original call was for silver to bottom at $34 to $37, [but] if this level does not hold then look for silver to fall to the $30 level before possibly rebounding.” Though silver did fall even lower to the $30 level after breaking $34, it headed even lower to the $26 level for the briefest of moments before rebounding to the $37 level once again. However, after that, silver re-tested the $26 level again this year.
Thus, for anyone that started stacking silver since our call to do so at $9 an oz in 2006, and every year since then, purchasing silver at $26, $30 and $35 an oz is hardly a concern when considering one’s average cost of silver. However, for new silver buyers that elected to purchase silver between $34 to $37 an oz and $30 an oz in 2011 and again this year when silver hit $26 an ounce (my call for the silver low for 2012), one may have accrued silver at about an average of $30 to $31 an oz. Thus, if one timed all the lows of silver over the past 14-months more accurately, perhaps one could have purchased silver between $26 and $28 an ounce. As I’ve stated before, I believe that such a task is impossible and some years, we are right on mark at calling nearly the exact lows and highs of silver and gold, while in other years, our calls have been very decent but have left room for some improvement. Still, consider if one has built, after 14 months, a silver position at about an average price of $30 to $31 a troy ounce and one has still not seen silver turn a profit as silver is still hovering at around $26 to $27 an ounce today for an approximate 12% loss on one’s average cost of physical silver. Here is how possession of the quality of patience can still yield enormous profits.
On May 16, 2012, I published a bulletin (this one was available not only to my clients but also to the public) in which I stated that there were signs back then “that a major bottom [was] imminent rather than sign[s] that the gold and silver bull [was] finished.” Notice that I stated on May 16, 2012 that a major bottom was “imminent” and NOT that a major rally was “imminent”. These are two different statements with two vastly different meanings. Just because a major bottom is imminent does not mean a major rally is imminent. This is another key point that many gold and silver buyers fail to distinguish. However, if one believes that a major bottom is imminent, then that does mean from that point forward, the low-risk, high-reward paradigm, does apply and that buying assets close to a major bottom should provide ample reward at some point in the future (though not necessarily the “imminent” future). Since I published my thoughts about an imminent major gold and silver bottom on May 16, 2012, gold and silver and gold/silver mining stocks have all moved strongly higher and then strongly lower again. To see how my statement has held up over time thus far, let us take note of where the recent lows in gold, silver and the HUI gold bugs index have been. On May 15, 2012, gold hit a low of $1526.70 an oz, silver hit a low of $26.73 an oz, and the HUI hit a low of 372.24. To this date, only silver has headed lower since May 16, 2012, and ever so slightly lower to an interim low of $26.11 an oz., a mere 2.3% lower than its May 16th low. Thus, one can easily state that my May 16th statement that gold/silver and gold/silver mining stocks were all very close to major lows back then has been very accurate.
And even if gold and silver prices are violated to the downside before the major new leg higher in gold and silver begin, if they are only violated for a very short period (meaning 72-hours or less), May 16, 2012 will stand as a very good entry point for anyone that chose to go long in gold and silver assets that day despite the intermittent volatility since then. The frustrating aspect, I’m sure, since May 16, 2012, has been the first factor of volatility that I discussed above. Since May 16, 2012, gold and silver assets have produced big gains, big losses, AND lots of frustration among those that do not understand gold and silver markets from the churning in price up and down and the lack of big breakout thus far. And this is when understanding to be patient in purchasing gold/silver becomes paramount. Since new lows have not been established in gold and silver since May 16, 2012, there is no reason to panic sell out of gold and silver just because of the large amounts of volatility. Even for the newest buyers of silver and gold that don’t have the benefit of buying large initial tranches of silver at $9, $11, and $13 an oz and gold at $560, $600, and $680 an oz and may be sitting on losses in physical gold and physical silver as of this current time, being patient will very likely enable you to turn small losses now into huge gains in the future. If waiting 14-months seems like a long time for a pay-off, one must put this waiting period in the proper framework within our current 11-year gold and silver bull that is far from finished.
Consider the following hypothetical scenario. Suppose that in November 2007, one had purchased physical gold (at $850 an ounce) for the first time ever, then watched it happily as it moved over $1,000 an oz by March of 2008, and then sadly as it pulled back to $850 again by May of that year. However, believing that a 15%+ correction was a sufficient enough annual correction to merit further purchases of gold, you added to your current stash by doubling down on your physical gold at $850. Only then, gold moved to an intra-day low of $681 on the Comex by the end of October, 2011, and from listening to constant media chatter that the gold bubble had burst when its price had hit $1,000 an ounce, you concluded that you missed the opportunity of a lifetime by not selling at the top of the gold bull when gold reached $1,000 an ounce. Furthermore, since you had held gold for what seemed like a long time now and the value of your gold had now dropped nearly 20%, you figured that 11-months of waiting was a long enough waiting period despite 2008 being the eighth year of the gold-bull, and you decided to sell everything at a 20% loss at $681 an ounce. Well, the only way this hypothetical scenario could have played out in real life is if you had never done any homework about the gold and silver market and had zero to very little understanding of it.
Had you just been patient enough to understand that gold and silver volatility was artificially induced by the banking cartel with the precise reason to convince you to sell gold and silver at major lows, and had you held on for just a few more months, you would be sitting on an 86% gain today instead of dooming yourself to a 20% loss. Furthermore, from that intra-day low in 2008, had you just held on to your position for another two months, you would have regained all of your losses and had been sitting on a profit in relatively short time. There are far more instances of such occurrences whereby people sell out of gold and silver at 20% to 25% losses than those occurrences when gold and silver buyers have the patience to sit through volatility and reap the benefits of massive legs higher that inevitably follow long periods of flat, declining, or churning prices. As any maalamalama client knows, this truly is not a case of us Monday morning quarterbacking and fitting our analysis to fit the hindsight of what has happened in the past but rather a re-telling of stories in which we told our clients to remain patient for big gains ahead during periods of great negative gold and silver sentiment due to the pieces of the puzzle that indicated the very strong likelihood of much greater gold and silver prices ahead. Again, one must remember that the gold and silver bull is now into its twelfth year and that the largest percentage gains of this bull, in my opinion, are still ahead. Thus, we have demonstrated that patience is not only a necessary trait BEFORE buying into gold and silver assets to ensure a decent price foundation from which to build, but also a very necessary trait to possess even AFTER buying into gold and silver assets at a low-risk, high reward price point. Of course, some of our clients have been lucky enough in the past seven years to buy into gold and silver assets at such a low-risk, high-reward point that they were sitting on 30% profits within two months, but this is an extremely fortuitous scenario that would be unreasonable for everyone to expect.
Patience when buying gold and silver involves understanding the markets into which you are buying, and not enough people that buy gold and silver bother to take the time not only to understand the concept of volatility but to understand how this concept relates to the gold and silver markets specifically and that volatility in gold and silver does not have to translate into risk. Thus, when the banking cartel engineers rapid gold and silver price spikes to the downside in the face of no important news affecting supply and demand and sometimes even in the face of bullish supply and demand news, it is with ease, that they are able to flush many new gold and silver investors out of the market. If they are able to repeatedly flush the same gold and silver investors out of the market year after year, then shame on these new gold and silver investors for not doing their homework prior to buying and for being fooled so easily. Thus, even though we feel that the prices for gold and silver (including gold/silver mining stocks) as of May 16, 2012 would have provided good long-term prices that will eventually become very profitable, we know that many buyers will never reap the long-term profits that are coming due to a simple lack of patience.
Thus, the number one critical lesson to embrace is one of patience when buying gold and silver as a means to preserve and build wealth. Patience, in my humble opinion, should be the characteristic at the very top of any list of qualities that are necessary to build wealth when buying gold and silver. Unfortunately, from my experience, patience is also likely the characteristic that the fewest buyers of gold and silver possess. In my experience, 100% of people that understand the gold and silver market possess patience. Even if they do become frustrated at times they still remain patient and never panic sell into major gold and silver bottoms and permanently leave the gold and silver markets. However, the problem lies in the fact that a low percentage of gold and silver buyers understand the gold and silver markets so they buy into it without understanding the patience that is needed to reap the benefits. Thus, if one desires to build wealth buying gold and silver, I would state that having patience, or if you don’t have it, a crash course in learning patience, should be a prerequisite to buying gold and silver.
Despite a good deal of hard factual evidence of Central Bank documents obtained from FOIA requests that proves banking cartel price suppression of gold and silver, and despite a mountain of circumstantial evidence that suggest the same conclusion, it is baffling that there are still many talking heads out there that refuse to acknowledge gold/silver price suppression schemes. Even most of these people in the past have also ridiculed any suggestion that stock markets were rigged by HFT trading programs and that interest rates were rigged and now that both of these “conspiracy” theories have been proven to be a fact beyond a shadow of a doubt, there are those that steadfastly maintain that gold and silver operate in free and fair markets. In fact, there are enough of us that have tweeted exact times and dates that gold would suffer significant drops in price just hours before it happened as if on cue. Our ability to do so has nothing to do with ingenuity but merely is due to the very simple realization of certain rigging patterns the cartel employs, a fact that should be impossible if the gold and silver markets were indeed free. I don’t want to waste any more time and energy on the bankers’ rigging of gold/silver prices lower other than to say that only the most naÃ¯ve of naÃ¯ve people can honestly believe that the same banks that would willingly collude to control LIBOR rates in an inappropriate manner would never collude to rig gold and silver prices (lower) in their favor as well. Maybe the tooth fairy and Santa Claus still does exist after all and I just am ignorant of this fact too.
In conclusion, should gold and silver exhibit volatility this week, and the likelihood is that intra-day at some point this week, we will see some marked volatility to the downside again, always recall that patience is the go to mantra during times of negative sentiment such as these, unless or until key support levels are violated. Although we are gold and silver bulls and still remain fervently so, this does not mean that there have not been times during the past 8 years that we have been very negative regarding the short-term prospects of gold and silver. These times have been plentiful and we have closely informed our clients of these times when great caution and patience is merited. Due to the recent great volatility of gold and silver, being patient remains recognizing that the short-term trends for gold and silver can be very negative at times. However, being patient does not mean avoiding great entry points for gold and silver assets at low prices despite short-term volatility in prices either. Until then, all the up and down volatility is meaningless and only merits patience until the massive break out to the upside that is inevitable occurs. If key support levels are broken, then it will be time to change the patience mantra. Until then, all remains on track for a large move higher in gold and silver.
About the author: JS Kim is the Founder and Chief Investment Strategist of maalamalama, a fiercely independent research and consulting investment firm with a focus on gold and silver to combat perpetual global banking fraud.