American Gold Eagle CoinIf you have been following the price of gold during the first quarter of 2014, you have had to endure more ups and downs than the world’s scariest roller coaster. Gold started out the year just above the $1,200 mark and rose steadily into the month of March. It almost reached $1,400 before the rally ran out of steam and gold prices started to drop. Then they went up again and then they went down again. After the first week in April, gold is hovering around $1,300.

If you are a short-term speculator in gold, you better have a strong stomach because it is impossible to predict whether gold will go up five days in a row or go down five days in a row. If you are investing in gold for the long-term, take a breath and relax. Forget about the one-day $20 dollar declines. All you need to ride out the short-term ups and downs is the right mental approach to precious metal investing.

Instead of having a reactive investment strategy, you should have a deliberate strategy and try to avoid all of the “noise” that makes gold spike up or dip down in the short-term. Worry about the big issues that will have a permanent effect on gold prices. Instead of worrying about a quarter-point hike in interest rates next year, worry about the almost $18 trillion national debt. Worry that the disappearing middle-class and the huge challenges we face with health care and immigration.

Take a historical look at gold prices and the conditions that were present when they went up over a sustained period of time. During the Carter Administration, inflation averaged 11.3 percent in 1979 and 13.5 percent in 1980. Between 1976-1980, the price of gold soared from $100 per ounce to $800 per ounce.

As any first-year economics student will tell you, supply and demand are the underlying forces (or at least should be – read gold price manipulation article) that drive the price of gold. As the standard of living continues to rise in China, India and other economies around the world, the demand for gold also continues to grow. Central banks are buying gold by the ton and reducing the world supply of gold. These mega trends are projected to continue well into the future.

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You can understand why there are many companies that spend hundreds of thousands of dollars on TV commercials telling you that now is the time to buy gold. If gold has been declining steadily for six months, they will tell you that a bottom has formed and gold is poised to move higher. If the price has been going up, the line is that you better hurry and get in on the upward trend before it is too late.

Don’t be tempted by so called experts. It was only a few months ago when the Doom-sayers were predicting gold would soon be selling for under $1,000 an ounce. A few years ago, many of those same experts were predicting that gold would be selling for more than $2,000 an ounce today.

Preserve your sanity and stop worrying about the short-term price swings in gold. Gold can balance out other investments and will help preserve your future buying power. Relax and be happy you own gold.
 

One comment on “How to Ride Out the Short-Term Ups and Downs in the Gold Market

  1. Dr. Vivienne Perkins on

    This is an entirely sensible article. I would like to see one on “check-controlled IRAs”. Vivienne Perkins

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