Monday, February 18, 2013

Gold and Silver on Sale

Gold and Silver sold off going into Saturday, Australian time as US traders closed out positions going into a 3 day weekend for presidents day (sounds like Kings birthday - I thought they got rid of the King?). Anyway gold and silver got sold down below recent support levels - see chart for current prices.

Of course as prices fell CNBC couldn't help gloating about it and their gun trader admits to loosing money buying gold. He says he bought the GLD ETF on the way up last year and then sold on this recent down move - buying on a rising market and selling on a falling market. Brilliant! if Jesse Livermore had done that no one would have ever heard of him, just like no one will ever remember this CNBC struggler. Their trader admits to "wanting to hold this trade for a year" - so why didn't he? did someone hold a gun to his head and say "go ahead make that trade punk" or was he leveraged to buggery and "got sold out" not "traded out of" - this would make more sense. As the afore mentioned Jesse was quoted as saying "be right and sit tight", in a 12 year bull market in gold this is very sound advice. As I regularly tell my clients don't buy gold if you think that you will need to draw down on all or a substantial portion of that holding in under 12 months, not only are Australian Capital Gains Tax rules advantageous for holding assets over 12 months prior to realizing a gain but the longer you hold the less that daily/weekly volatility will effect your decision to sell.

Back to CNBC, I spat my weetbix when the work-experience girl said "as interest rates are starting to normalize people are looking at the gold trade and not seeing the opportunity any more". Gee really? well I haven't checked what ING Direct is paying for cash management in the US lately, lets go look - Wow 0.75% return (last time I looked 6 months ago it was 0.8%). So for every $1,000 I put into that account I get back $7.50 in interest pa - yeah I will dump my 12 year silver/gold position for a return like that, where do I sign up?

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