A few weeks ago, I got extremely honest about gold and silver prices. The response to that article was actually much better than I was expecting — plenty of people agreed that yes, gold is a great investment for the next five years, but we’re going to probably see some corrections before then.
That’s what this article is about. There are plenty of rumors throughout the gold and silver investing circles pretty much all the time, and many are suggesting that gold will get cheaper during the summer. Let’s look at potential causes as well as talk about whether this is time to buy gold.
How a Market Correction Works
When prices drop a little while they’re still generally going up during a bull market, it’s called a “correction”. The reason for the word “correction” is to put an emphasis on the fact that prices are still mostly headed in the “right” direction, it’s just that the market isn’t perfectly efficient so it might have gotten ahead of itself.
For example, if you look at the historical price of silver, you’ll see that during 2008 the price dropped almost in half over the course of several months. Of course, silver has always been much, much more volatile than gold, but the point still stands — silver was still cheap then, and it’s gone up like 400% since that time just a handful of years ago.
Long story short, sometimes the market corrects, and it can take a few months to recover. But this is actually a huge opportunity, because it means that the price is about to go higher — it’s just a temporary drop. This is essentially a buying opportunity.
How to Take Advantage of a Gold Correction
So yes, it’s extremely possible that the price of gold will take a huge drop in the coming months — or a slight one — or not one at all. But we need to prepare ourselves and our portfolio to take advantage of whatever happens.
Remember, during a gold price correction, people freak out and often liquidate their assets and jump ship — only to miss out on the overall bull market because of fear. Caution is good; fear is bad. Caution leads us to building relatively boring yet safe portfolios, while fear can have us dump perfectly good portfolios in the middle of a storm.
While I’m not a huge fan of Warren Buffett, he certainly is right this time:
“Be fearful when others are greedy and greedy when others are fearful.”
That’s generally good investing advice regardless of the market being discussed.
The Best Way to Buy Gold During Stormy Markets
I’ve said this a lot in the past: I’m a huge fan of SilverSaver.com. They sell both gold and silver — automatically. You add a little to your portfolio every week or month — your pick. This allows you to essentially average out the overall returns you’d get by investing during a correction — without having to actually “time” the market. Plus, it’s just less of a headache.
I’ll be writing more about passive investing and why automatically investing is pretty much always the best option for investors who aren’t essentially experts at the markets or who literally spend all day investing. If you’re a beginner, chances are, you should invest passively.
If you want to learn more about passive investing so that you don’t have to constantly time the market or worry about news, sign up for our newsletter. We’ll also email you important updates about silver, oil, inflation and investing in general.
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