-- Posted Tuesday, 21 February 2006 | Digg This Article
Here is a good question to consider.
You want to make a lot of money in gold & silver stocks, but how do you minimize risk? Or how do you maximize the possibility of scoring a win?
All gold & silver stocks come with an element of risk and naturally the exploration plays will offer the greatest risk & also the greatest reward. Mining companies that are developing an already proven deposit will of course be less risky because their share price generally has already climbed substantially to reflect the company’s success.
And what can be said of the performance of this gold market as a whole so far for 2006?
”Gold funds sparkle. They have done better than all but two of the 49 types of stock funds tracked by Lipper Gold funds, which are viewed as an inflation hedge, are up almost 9% in 2006 despite a pullback last week. Gold suffered a bear market in the '80s and '90s but is now a few years into a cycle of higher prices, says Gary Kaltbaum, money manager at Kaltbaum & Associates. Price corrections should be expected, he says.” http://www.usatoday.com/money/markets/us/2006-02-19-risky-usat_x.htm
Now let’s go back & read the last part of the above text.
“Price corrections should be expected…”
Now what does this statement imply? Generally price corrections & wild swings are evidence of a bull market in play & are to be expected. Well, let’s take a moment and address these wild price swings we’ve begun to observe.
"What I would like to demonstrate in this missive is that
far from heralding the demise of gold, violent downward reactions of this nature are going to become more and more
the norm as gold firmly establishes itself in this phase
of its generational bull market." Dan Norcini, Le Metropole, 2-9-2006
What Dan Norcini is simply telling us in the above statement is that price corrections & wild price swings are a very normal occurrence for any bull market. And in reality for shrewd & professional investors wild price swings represent excellent opportunities for scoring profits.
Paul van Eeden - “…my belief is that the gold price is going higher and so I am not concerned. If I think that we will see $1000 an ounce in the next few years it really does not matter to me what the gold price is next week, or next month.” http://www.paulvaneeden.com/displayArticle.php?articleId=144
pve@publishers-mgmt.com,
And getting back to the subject or risk & gold stocks…
Never place all your cards with one player. Making money is about spreading risk & averaging long term gains. Your desire is to repeat a process that is repeatable and not just play the market like the lottery hoping for just one big win.
Kevin Kerr, a veteran commodities trader and commentator for MarketWatch. - "Gold seems to also be rebounding from the steep over the cliff type profit taking we have seen in the last two days," he said. "Funds wanted to take some cash off the table and gold was due for a correction anyway but now that a healthy cleansing has happened the market can resume its rise." http://www.marketwatch.com/news/story.asp?siteid=bigcharts&dist=news&guid=%7BACFF1909%2D6C5A%2D490C%2DA9B7%2D82BE1E54C7DD%7D
As a general rule it should be a standard practice to always spread your risk over a minimum of six companies. Do not ever just purchase one stock with the expectation & hope that the one you picked will be a winner. This sector is risky & no one knows what tomorrow will hold.
“For nearly a quarter of a century, gold fell and stocks rose. Get ready for the opposite trend.” The Daily Reckoning, London, England, Friday, February 10, 2006
Other good advice to follow is to always seek the advice of an established brokerage company that specializes in resource & gold stocks. You may not want to pay their commission, but their advice is worth its weight in gold as these brokerage companies follow exclusively this gold market 24*7. Don’t be cheap. Pay for good advice. Just average the commission cost as part of the investment expense.
And other than just a desire to make a lot of money what is a principal reason for investing in precious metals stocks today?
“The Middle Class on the Precipice.”
“During the past generation, the American middle-class family that once could count on hard work and fair play to keep itself financially secure has been transformed by economic risk and new realities. Now a pink slip, a bad diagnosis, or a disappearing spouse can reduce a family from solidly middle class to newly poor in a few months.”
“Middle-class families have been threatened on every front. Rocked by rising prices for essentials as men’s wages remained flat, both Dad and Mom have entered the workforce—a strategy that has left them working harder just to try to break even. EVEN WITH TWO PAYCHECKS, FAMILY FINANCES ARE STRETCHED SO TIGHTLY THAT A VERY SMALL MISSTEP CAN LEAVE THEM IN CRISIS.”
http://www.harvard-magazine.com/on-line/010682.html
And one final major point to illustrate in our discussion is that if you try to time this market on a day by day basis you are going to drive yourself crazy. Better to understand & concentrate on where you believe the longer term trend is going. And of course we believe that trend is far higher still.
Gold Letter is an Internet publication emailing reviews of gold & silver stocks all ready climbing higher. Subscribe to Gold Letter for LIFE! click here
Comments? Thanks for coming by & please do come back.
David N. Vaughn
Gold Letter, Inc.
David4054@charter.net
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-- Posted Tuesday, 21 February 2006 | Digg This Article
