One of the greatest joys of investing is going totally against the crowd and getting it right. Not only does this guarantee the biggest returns, but it shows your are thinking independently. It always surprises me that people get locked into panic mode, as is the case now with gold, mostly because by definition one overdone trend creates a trend of equal or greater force in the opposite direction. Call it the law of “shake out the weak longs so the smart money can take their positions and receive the greatest profits from the rally as they always do”. You can literally poll 1,000 people and ask them what they think about an asset. If over 90% are bearish on a trade, then close your eyes, buy, and go on vacation somewhere. It’s not quite that simple, but it sort of is.
You don’t necessarily get wiser as you age. Certain types of people with certain personality profiles will continually grow, while others stay the same because experiences are perceived differently by people. The same thing holds true for investing: certain patterns happen over and over and over again and some people just don’t learn. When real estate was the buy of the century, everyone was bearish. When stocks were poised to explode, people were bearish. And now when gold is on the verge of breaking out, people are….bearish? I’m not getting it.
I do my portfolio no favors by being biased and a “gold bug” of religious proportions. This is why I am one of the few gold bulls that said a 50% correction is possible, but no big deal, especially in the commodity space. 50% corrections are totally normal, which is now obvious to most people because of what’s happening with stocks. Just take this lesson and apply it to gold, it’s really that simple. There is a time and place for everything, and gold’s time is coming. Gold will literally be a double in the same way real estate in select pockets of the U.S. was in recent years. Again, no big deal- this is just how assets move.
The only thing that has me hesitating is the dollar, which probably will rally to the moon. The short dollar trade has become crowded to the extent that a rally is pretty mandatory right now. Every investment needs to be viewed with a balanced outlook, which is why I was personally buying real estate and not gold for the past 2 years. Now things are shifting, but I’m not too sure people recognize it. It is still a little early (although a short-lived countertrend rally is likely), but I will probably be giving my obligatory “buy gold it’s the bottom” speech soon. Maybe it will be at $1400, or maybe $1200, but gold is most certainly due for a “nobody saw this coming!” rally, just like the good old days.