I had a recent conversation with a friend of mine regarding the Precious metals and Gold in particular. He asked me if it was too late to invest in Gold and I told him, flat out, that I thought the best was yet to come. I did say that the markets were overbought so I recommended the following strategy. Decide how much capital you are going to commit to Gold and invest 1/2 of that amount now in case the market ignores its overbought condition and continues along its merry way. Keep the other 1/2 available if 1) the market experiences a 5% retracement or 2) the market advances another 5%.
Now, here's what amateur investors do and I've seen this happen more often than not. Because I mentioned that the market was overbought, my friend decided to hold off on that first purchase because he wants to try to "buy the break". This is the old "Buy Low, Sell High" syndrome that most investors suffer from. His logic is flawed because the market may not experience a retracement, at least not anytime soon. So, my friend has missed out on the $20 rally that has occurred. Remember, trend followers NEVER try to " Buy low, Sell high". It rarely, if ever, happens. BUY strength, SELL weakness.
Dale F. Doelling
Chief Market Technician
Trends In Commodities
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