In almost every article on this website, I repeatedly say that I don’t like forecasts. I think betting your future on what you think “will happen” is a recipe for disaster. I’m a firm believer in figuring out the main possibilities, and getting prepared for those possibilities.
This doesn’t mean, of course, that I don’t believe in talking about other people who are forecasting for gold and silver. We’ve talked about billionaires Paulson, Rogers, and Soros here on a weekly basis. But no matter what — there’s no gospel truth in the words of any investor.
If Warren Buffett himself gave me some stock picks, I’d be skeptical of them and wouldn’t bet the farm on them. That’s because I know that in the investment world, there’s no such thing as a sure thing.
In this article, we’re going to first talk about forecasts and knowing the future, and then talk about this market specifically.
It’s About Strategy, Not Forecasts
Last year, our gold and silver websites really began to grow. Other bloggers began linking to these websites and we began to see our traffic soar to points that hadn’t yet been reached. At one point, I said silver prices had risen so fast that they were in a “bubble”. One reader emailed me and cussed me out. That month silver dropped so much that he was probably wiped out.
Then later, I wrote an article for the economic think tank of the Mises Institute in Canada. I wrote an article talking about how we should likely see a pause or even a drop in the rising gold price. Within days, gold started tanking.
This last week, I warned everyone that the Fed could make gold and silver hurt depending on what they said. I explained that if they raised interest rates — not just this week, but at any point — that would be a horrible blow to gold and silver. The Fed then announced they were staying the same — and some people were expecting QE3 to literally start now. There may or may not be QE3 — it might start at any time in the next few months. But the market has reacted: and gold and silver dropped.
I don’t make solid forecasts. And I never bet the farm on anything. I try to remain skeptical. So far, that’s worked on an almost unbelievable level. It’s ironic, but sometimes the people you should listen to are those who know that they could be wrong.
That’s why I’ve been ranting about the fail-proof portfolio for those of us who aren’t fans of losing money.
When You Should Speculate
This is important: if you aren’t ready to retire yet, or are going to struggle to retire, you shouldn’t be making risky bets. I can’t emphasize this enough. Speculation money should be seen as play money — and if you’re not already ready to retire, then speculating is likely too risky.
This is just a general rule of thumb. Some readers might be able to speculate beautifully — but some might not. Either way, the general rule is: if you need it to retire on, keep it in your main, boring portfolio, mixed with stocks, bonds, and cash. Click the link above to learn more about how to put that kind of portfolio together.
What Made Gold and Silver Drop
Gold has been volatile like usual for the last 6 or so months, mostly because the world economy has been volatile like usual for the last 6 months. There are mixed signals about Greece, the US debt, the economy, unemployment, spending, and political elections. A lack of certainty isn’t always a good thing for gold — after all, a bull market is usually driven by certainty at least when it comes to that particular asset.
Gold has been in a downward trend since September. There have been two upshots, but they failed to break the $1,900 mark. There’s less of a chance of QE3, though it still might happen. There’s also the chance that interest rates might start increasing this year. When that happens, it probably won’t be good for gold or silver.
But what happened to silver? A lot of the same factors above. Silver has bounced around quite a bit since the Fed announced that it was keeping everything the same — no immediate QE3. This means the market is still suspicious and uncertain about the future.
You know how I feel about the recovery. But just because the economy isn’t “fixed” doesn’t mean the market might not respond as though they think it is fixed — at least in the short run. And that’s another reason to never bet the farm even on “inevitable” economic outcomes… the market isn’t perfect.
I’ll be keeping up with the market and will email subscribers (for free, of course) if any new developments occur. If you want to see what I was talking about just a few days ago, click here.
Join Over 8,000 Investors:
In less than 15 minutes a week, you'll learn everything you need to know about gold prices, the collapsing dollar, and the real inflation rate.
Thousands of investors have already signed up for the newsletter and are getting the info for free: