Should I buy gold now or should I wait for another pullback?  That is a valid question, one that all investors seem to ask at one point or another.  Sure there have been pullbacks in the price of gold in the last nine years.  In fact the largest pullback that we have seen was 13% since 2001.  But waiting it out could cost you more if you don’t time it perfectly.  Gold has closed higher nine years in a row and has risen over 350% during that time frame.  Some experts are calling for gold to rise to $5,000 to $10,000 per ounce in the next few years.  So is it really worth it to try to catch a 5 to 10% pullback?  Maybe.  But I don’t think so.

Gold has proven that in eight out of the last nine years it has risen an average of 13.1% in the last four to five months of the year, so waiting it out now could be very costly.

To answer the question of do I buy now, you must first ask yourself a question: do I own enough gold to protect my assets if something happens in the economy like massive inflation, another round of banks blow-ups, a dollar collapse or more ridiculous money printing.  Having enough gold means not having to worry about your wealth/assets in the event something happens. 

Jeff Clark of Casey Research had this to say, “Today we face the prospect of prolonged economic stagnation, and most governments are administering grossly abusive monetary policy as a remedy. While some of the consequences are already being felt, the full ramifications have not hit your wallet yet. But they will.”

Many experts recommend having at least 10 to 20% of your assets in gold.  This is because gold is first and foremost a form of financial insurance.  Depending on what is coming in the economy in the years to come 10 to 20% may or may not be enough.  So the question is where do you think our economy is headed, and then you can answer do I have enough?

If you have $100,000 saved for retirement and you own two gold American Eagles, are those two coins really going to protect the $100,000 you’ve saved?  Probably not.  Would you buy $10,000 worth of insurance for a car you owned worth $50,000?  Probably not.  The best thing you can do is get a sense of where you think we are headed and then talk to a precious metals expert about your goals and objectives to determine what is the right amount to acquire for your portfolio.  After you have built an adequate level of protection then you can hope that it grows faster then inflation.  We are in a strong gold bull market so I believe it will.

Gold is a safe haven and has been considered as such for thousands of years.  Therefore it makes sense that we have seen gains in the price of gold upon economic concerns.  Recently we have seen talk in the news about a “double dip” recession which has investors very concerned.  In conjunction with recent bad economic data coming from Japan, the housing market and the manufacturing sector it in no wonder gold is up over 5% over the last three weeks.

Gold is first and foremost a financial insurance and over the long-term it keeps up with inflation.  In the last ten years however we have seen gold outpace inflation and most asset classes, including the stocks, bonds and real estate.  So while investors are seeking gold for safety reasons, lately it is also being used for growth.  For the last ten years gold has provided its owners with a win-win situation, being both good for safety and growth.  Traditionally instruments used for safety are low risk, low yield vehicles.  Gold has averaged a 17.1% gain per year for the last nine years, a nice return for a safety vehicle.

Gold has a seasonal trend pattern as discussed in an earlier blog post.  Gold typically picks up from here.  In eight out of the last nine years we have seen gold rise an average of 13% from August through December.

Look for gold to continue its trend as the government will continue to put pressure on the dollar through quantitative easing (money printing).