If you want to know the best way to become wealthy, you should listen to those who are already wealthy. You may have started to get nervous, as you have watched the price of gold and silver decline almost every day in the month of September. Don’t make the mistake of selling gold and silver when the precious metals market is down. To borrow a famous quote from J. Paul Getty,”Buy when everyone else is selling and hold when everyone else is buying. This is not merely a catchy slogan. It is the very essence of successful investments.”
The strategy of buying when the majority of investors are selling, or selling when the majority of investors are buying, is known as contrarian investing. In order to be a successful contrarian investor, you must have conviction that your precious metals consultant has provided you with enough information so that you feel confident your analysis is accurate and the consensus market opinion is wrong. When you don’t follow the majority consensus, and go against the trend, you can look foolish if the trend continues. On the other hand, big gains can be made when you are right.
Whether you are betting on a 20-1 long shot at the racetrack, or buying gold and silver when the experts are forecasting lower prices, you are going against the odds. Many of the most successful contrarian investors have made small fortunes by investing in precious metals when the rest of the world thought they were making a foolish mistake.
Jim Rogers – Opportunity to Buy Gold
Jim Rogers, who made his fortune in commodities, is well known for being a contrarian investor. He does not buy when prices are near their highs. Momentum stocks, without underlying value, do not make it into his portfolio. He buys in quantity when an investment falls out-of-favor and he believes it is on sale. Rogers view on gold is fairly neutral these days. He is maintaining his position, but believes that there is still room for the precious metal to decline further. He notes that almost all commodities drop to about 50 percent before beginning a bull run. Gold did have a very bad 2013, but prices have only retreated by about a third since hitting their highs (touched $1,900 per ounce) in September of 2011. Jim Rogers believes that there will be a strong buying opportunity in the next year or two if gold moves down toward $1,000 an ounce, or about 50 percent from its September, 2011 highs.
Marc Faber is Saying Buy Gold and Silver
Mark Faber, alias “Dr. Doom,” is perhaps the biggest contrarian of them all. He has been predicting since 2011, and continues to predict, a steep decline in the stock market is just around the corner. While gold and silver prices have dropped by about 4 percent in the first half of 2014, Faber stands firmly in his conviction that gold and silver will outperform 1 the stock market in the coming months and years.
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George Soros Got it Right
Sometimes it is smart to sell gold. George Soros, the billionaire hedge fund manager, and noted contrarian, got out of gold stocks in May of 2011 while everyone was still buying. He locked in solid profits and did not take the ride down when gold began its steep decline in the following years.
Contrarian precious metal investors rarely get the timing exactly right, but they are prescient enough to see that a trend is nearing its end. Don’t be a contrarian investor just to go against the crowd. Be a contrarian investor when you believe that you are right and the crowd is wrong.
Image Credits: JR image, MC Image & GS Image.