Gold Investing - What Will You Do When Gold Goes Parabolic?

The price of gold has taken a hit the last two days which is not unexpected. It became overbought - gaining almost 30% in just two months. At the time of this post, spot gold stands at $1761.10. That's were it was less than two weeks ago. We may see more volatility with the CME raising margin requirements by 27% at end of day tomorrow. That usually results in downward pressure on the price of gold (it sure worked well for silver). But the bull is not dead - yet.

The well-respected Dennis Gartman stated recently "Gold is strong in any and all currency terms and it is now entering that stage when prices go parabolic." So what actions will you take if/when gold takes off to the stratosphere? Will you be buying more gold at $3000 or $4000 or $5000 with the idea of selling at (insert your figure here)? No one knows what the top will be and to try to time the exact top is foolhardy.

If you plan to sell your gold when the price goes parabolic, you will have to decide where to invest the proceeds. No easy task if you are looking for a good fiat currency to invest in. The latest issue of Markets at a Glance commentary from Sprott Asset Management provides an answer - real assets. A brief quote from this six-page PDF states "What needs to be understood is that paper promises (sovereign debt and fiat currencies) are ‘faith-based assets’. They have no inherent value. They have perceived value in that they have historically been convertible into real assets. With their value decreasing against real assets, however, we are of the view that holders of faith-based assets will be increasingly unwilling to store their wealth in them. This will drive up the prices of real assets versus faith-based assets, a process which we have already begun to see en masse." You will find the entire commentary here.

Real assets can include many things besides gold and silver - a car, land, tools, a pantry full of food, a generator, items to make your life easier, etc. I just invested in a real asset that should give me years of service - a sturdy wood splitter. For me (living in the north woods of Wisconsin), this is an asset I can use to easily split wood. I can use the help heating my house during our long and notorious winters thereby saving on heating bills. Another asset I had that came in handy a few weeks ago was a Honda generator - used extensively when I lost power for about a week. You might want to start thinking about what real assets you could use before things get too crazy.

Of possible interest to some readers is the announcement by the U.S. Mint on Monday (8/22) that they are suspending sales of all numismatic gold coins at this time. The post I read states "It seems the The US Mint has reserved the right to suspend sales early “in the event that the selling price of United States Mint gold bullion products begin approaching the sale price of the gold numismatic products.”" I wonder what they will decide to do now that gold prices have "dipped" by about 8% in the last two days. The full article is here.

Thanks for reading. Be sure to stop by my Gold Investing web site for useful gold information.