Why Procrastination is Harmful to Your Wealth

Monday, 29 October 2012
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Published in From The CEO

If you’re hanging in for the perfect gold price, you’ll never find it.  Better to stop thinking of yourself as an investor and find something else to do.  And what is aperfect price anyway?  If gold goes up, you’ll be unhappy because you’ll think you missed a good thing on the way up.  If gold goes down, you’ll be unhappy because you’ll think the yellow metal has now turned bearish on you.

As we’ve stressed several times in the Investor’s Corner, if you buy the physical metal while the price of gold consolidates, you’ll be making a smart decision.Let me emphasize those words again:  “physical metal.”  Think about that for a second.  You won’t be buying on margin.  So there’s no interest attached to your purchase.  You won’t be buying shares in a gold mine.  So there’s no strike or management conflict inhibiting your purchase.  You won’t be buying a gold option.  So there’s no expiration date tied to your purchase.

First-Strike

Instead, you’ll be buying the physical metal and holding for the long term.  Given this scenario, you shouldn’t despair over a small price move.  Ah! you say: but today gold closed at $1709.50, down $82.25 from its peak of 1791.75 just three weeks ago.  A move down of $82.25 is no small price move. 

At current prices, we beg to differ.  That move down represents a mere 4.59 per cent.  Once you take into account the big picture – 4.59 per cent is a miniscule number in this bull market.  Financial advisors routinely advise their clients to be able to withstand a market correction of 20 per cent.  By this benchmark, a 4.59 per cent move down in gold is extremely conservative.Under the circumstances, if you buy and wait rather than wait and buy, you’ll remove virtually all of the risk from your decision.

Right now gold is in a neutral mode awaiting big news to motivate a breakthrough to the upside.  A report from Reuters this morning points out that gold is staying “resilient” and holding its own in the wake of a downturn in corporate earnings.  Also, investors have turned away from big moves in the last few days while they prepare for a severe hurricane now ripping through the East Coast.  Analysts at Reuters also suggest investors may be stalling since we’re only one week away from the presidential election.  But as Jaimini Desai sagely points out in his Seeking Alpha newsletter article, it matters little which candidate wins.  While Mitt Romney has pledged to replace Ben Bernanke, “his most likely choices – N Gregory Mankiw and Glen Hubbard – have publicly pledged support for the Chairman’s policies.”  Little will change in the Fed’s commitment to quantitative easing in the face of a grim U.S. employment picture.  In other words, the Fed will keep printing money to jump start the economy.  And central banks throughout the world are similarly committed to keep the printing presses running.

Your purchase of physical gold during this lag time could be the smartest investment you ever made.  That said, procrastination could be harmful to your wealth.

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Trevor Gerszt

Trevor Gerszt has been passionate about gold since childhood. Growing up in South Africa, the world’s second largest gold producer, Gerszt spent his youth collecting gold coins. Surrounded by a family of experienced coin collectors, he gained valuable insight about the precious metal.

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