Gold and silver look scary, does it?

"Bull markets are born on pessimism, grown on skepticism, mature on optimism and die on euphoria.

The time of maximum pessimism is the best time to buy and the time of maximum optimism is the best time to sell."

Sir John Templeman

It is definitely dismal and I’m pretty sure you don’t want to hear about gold and silver at the moment. It is indeed scary as if the world is coming to the end in terms of investing in precious metals.  If this is what you are feeling,  I understand but don’t be so.  Nothing fundamentally has changed with respect to the super bull of gold and silver.

You can better tolerate this kind of correction if you really understand the fundamental reason for the super trend of gold and silver: the bankruptcy of fiat currency and a race to the bottom among them.  The conditions for the fiat currency is not getting better at all; rather, it is getting worse each day as far as I can tell.  I think Templeman’s definition of bull markets cited above is the best I have seen and I think the precious metal bull market is only at the stage of “grown on skepticism”. There is a long long way to go before it dies.

In the very near term though, it is indeed going through a rather severe correction for gold and silver. I warned you back in early June that this could happen if the US$ was appreciating: "If this does occur, then a chain reactions will ensue: an appreciation of the US$ (although short-term), plummeting stocks and unfortunately also a correction of commodities including precious metals (potentially severe but fortunately also short-term)." This is exactly what is happening now. Of course,  gold and silver have gone a bit too fast ahead of themselves in the past few months. It is actually healthy to have this correction to get rid of weak hands, in order for the bull to launch ahead with more strength.

I have personally experienced a similar severe correction in 2008, when the gold price dropped from $1000 to about $700 within 3 months.  Historically in the 1970 to 1981 bull market in gold, the gold price went from $35 an ounce to $850 an ounce.  In the midst of that gold bull market, in 1975, the gold price fell by half from around $200 to $100. The correction for silver was even more severe and pronounced.

 

If you are brave enough and stick to the big trend, you will make a lot of money when everyone else is running away. Of course, the position size is the best tool to ensure you can stay with the trend. No one can tell you how much you need to put into gold and silver. The size should be big enough so that there is material impact on your financial future but small enough so that you can sleep well at night and won’t be scared to death and drop out prematurely. 

Don't be a chicken little!