-- Posted Thursday, 28 March 2013 | | Disqus

Provided gold and silver can eventually reach new heights who cares what happens in the short-term? Well it does matter because as Keynes once observed in the long-run we are all dead. However, think back to 2008-9.

The gold and silver took a huge pasting in financial markets, along with just about everything else apart from bonds and cash. But the rebound in gold and silver prices came quickly, within six months and then precious metal prices headed very much higher.

Keeping your nerve

If you had panicked and sold out in the crisis you would indeed have been a loser, unless you had had exceptionally good intuition and nerve and bought back when things looked most desperate. In practice buy-and-hold worked out just fine, and it will do whatever happens next. Besides that is a very tough call.

Today we have our esteemed friend Dr. Marc Faber saying that even gold may not be a place for investors to hide in the coming systemic crisis. Look back at the 2008-9 precedent and he is perfectly right to make this warning.

Then again we have another widely respected gold guru Jim Sinclair talking on King World News about his view that the only protection is to buy gold now. He is very, very fired up about what the Cyprus bank account confiscations means for confidence in the banking system, and thinks large investors will turn increasingly to gold.

Of course it is not impossible for both gentlemen to be correct. The drop in the gold price could be nasty but short-term as in 2008-9 and yet still prove a good longer term hold if it recovers fast and then goes much higher in price.

Never sell gold?

Marc Faber is frequently quoted as saying he will never sell his gold. Surely only somebody who trusted in gold in the longer term would say that. Should you be selling if Dr. Faber is still holding gold? Are you really a better market timer than him? George Soros might be, and has recently lightened up his gold holdings but are you?

Besides we just cannot be sure – and this must be why Marc Faber still holds gold – whether the 2008-9 paradigm will hold true this time. That was an equity market event. What we could have in 2013-4 is a bond market event combined with an equity crash.

Past precedent for bond market crashes is that they do indeed drive money into precious metals. Perhaps that is why Jim Sinclair is so confident now in what he says, although he was wrong in 2008-9 about the gold price and gold junior stocks in particular and lost a lot of his followers then.

For what our opinion is worth in the shadow of these giants ArabianMoney notes that gold and silver prices always move in wiggly lines and not straight up, so there will always be future corrections even as the price makes its progress northwards. We would rather keep an eye on the future target and stay invested than try to be too clever.

-- Posted Thursday, 28 March 2013 | Digg This Article

About Peter Cooper:
Oxford University educated financial journalist Peter Cooper found himself made redundant by Emap plc in London in the mid-1990s and decided to rebuild his career in Dubai as launch editor of the pioneering magazine Gulf Business. He returned briefly to London in 1999 to complete his first book, a history of the Bovis construction group.

Then in 2000 he went back to Dubai to become an Internet entrepreneur, just as the dot-com market crashed. But he stumbled across the opportunity to become a partner in www.ameinfo.com, which later became the Middle East's leading English language business news website.

Over the course of the next seven years he had a ringside seat as editor-in-chief writing about the remarkable transformation of Dubai into a global business and financial hub city. At the same time www.ameinfo.com prospered and was sold in 2006 to Emap plc for $27 million, completing the career circle back to where it began a decade earlier.

He remains a lively commentator and columnist as a freelance journalist based in Dubai and travels extensively each summer with his wife Svetlana. His financial blog www.arabianmoney.net is attracting increasing attention with its focus on investment in gold and silver as a means of prospering during a time of great consumer price inflation and asset price deflation.

Order my book online from this link

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