Gold Panic - time to buy or sell??

With the price of gold steadily dropping since its peak in September, we’re seeing pessimism and panic in the market. Try not to be swayed by short-term events and realise that in the long run the price of gold will rise. This is because money printing is the most likely solution the leaders will choose to solve the European banking crisis and there’s a good chance we’ll see QE3 in the US during 2012. The more money they print, the less valuable the currency becomes which is positive for gold.

You’ll find many examples in history where nations opted to solve similar problems we face today in the world using QE to create liquidity. During the great bull market of the 1970s, for example, gold went from $35 to over $850 per ounce. In that spectacular rise there were several 50% corrections in the gold price and I’ve been saying all along that the market will become more and more volatile, so I would be using these periods of pessimism and panic as a wonderful buying opportunity.

Gold will rise as investors realise that gold is a valuable asset to store and protect wealth during periods of inflation or recession. Whichever economic environment persists, the value of gold will be driven upwards by the efforts of central banks to create liquidity and debase fiat currencies.

To quote the legendary Jim Sinclair:
“Don’t allow your emotions to direct your decisions. Your emotions will always be your best contrary indicator you have. You have to examine the circumstances and ask whether or not the reasons why you’ve committed to something have changed. And if they haven’t changed, you simply need to buck up and go the course because you’re right.

People are beginning to literally crack, defined as shifting their total focus to their emotions and away from their intellect. I’ve seen emotionalism in areas where it doesn’t belong, where it’s never existed before. I’m in total shock.”
If you’re already freaked out by the movements in gold so far, you might want to sell up because I’m warning you that the ride is going to get much bumpier on the way to gold at $5000. In 2012, I anticipate that we will see gold going at least to $2500 an ounce.

Central banks remain buyers of gold. South Korea, for example, increased its gold reserves by 39% in November alone. The fundamentals for gold remain intact. No market ever moves in a straight line. The long-term picture for gold remains positive. So hang in there, it will be well worth the ride!

For those of you who have not yet invested in gold and silver, this is a wonderful opportunity to get in at a good price before everything skyrockets once again.