Generally speaking, I’m bullish on gold. I see prices continuing to rise over the long term.
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But right now, as I write this, I would feel very cautious about buying a lot more gold at current prices.
I’m not saying I know what’s coming down the pike, nobody does. But I do know that gold prices have been rising to record levels, very quickly. And unlike during previous periods of rising gold prices, there have been few significant pauses, or times of correction.
These corrections, or dips in gold prices, typically occur when investors decide to take some of their profits out of gold and invest them elsewhere. And goodness knows there have been plenty of opportunities to take profits recently.
However, people take profits only when they see they could do well by taking their gains and investing them elsewhere.
What has been different this time around is that there really hasn’t been anywhere else to invest those profits. Stock markets around the globe have been in terrible shape. Plus there is ongoing concern about debt levels in both the US and Europe.
As a result, profits realized through rising gold prices haven’t been taken out. They have stayed in gold. This means the gold market in now very bloated with investment money.
And that’s fine, right up to the point where there is a rise in confidence in stock markets, at home or abroad. At that time, a huge amount of that investment money could move out of gold. And if that happens, we could be in for a big price correction.
As I said earlier, I still see gold rising higher over the medium to long term. The problems remaining for the western economies are deep-rooted, and won’t be cured any time soon.
But if you are buying gold coins or bars as a safe haven, now may not be the best time to buy. Myself, I would wait a little. I think a correction is coming, or maybe has even started. I could be wrong, but that’s my best guess.
As the correction pushes gold prices down, I’ll then be trying to estimate the low point, before they start rising again. It’s at that point that I’ll buy more gold.
Further reading…