Investment U: Two Key Lessons for a Booming Gold Market

October 06, 2020

Article by Rich Checkan in Investment U

We are in the beginning stages of a new bull market in gold and silver. It is for real – confirmed by the decisive breakout for gold in May 2019 – a full seven months before COVID-19 burst onto the world stage.

Fueled by pandemic fears (and the economically crippling government response), gold achieved a new all-time high of $2,075 per ounce in roughly one year.

Since then, we have seen some profit taking – which we love to see in healthy bull markets. But it got investors thinking about two things… Is it too late to buy into this bull market? And how can I tell when it is time to get out?

Market Update

Gold is up roughly 25% this year. Silver is up roughly 36% on the year. Much of both of those moves were completed a month or so ago.

It was too much, too fast. As with any market, when the precious metals market got overheated, profit taking brought the euphoria down a notch or two.

Remember, precious metals bull markets tend to last about a decade. We are either one year in or four years in, depending upon whom you ask.

And given what gold and silver did in the previous two bull markets (1971 to 1980 and 2001 to 2011), we are roughly one-sixth of the way to gold’s potential peak and one-tenth of the way to silver’s potential peak. We still have a long way to go.

The pullback needed to happen for the market to be healthy. Dips should be embraced, not feared. They are opportunities to buy well in this rising bull market. This year’s gains are mere fractions of what both are expected to achieve by the end of this bull market.

So, to answer the first question above, it is absolutely not too late to get in. Stay the course.

Time for Action

I buy gold and silver for two reasons: wealth insurance and profit.

After 25 years of working with investors, I believe most investments fall into these two categories. Wealth insurance is the store of purchasing power, with high liquidity, for a potential financial crisis you hope to never have.

I treat my gold for wealth insurance a certain way. I keep my 10% allocation at that level at all times. I never sell it, regardless of the price hitting new all-time highs or short-term lows. I need it always. I have it always. Period.

But gold and silver for profit is a different story. For me, that’s another 10% to 15% of investable assets – but only ...

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