Time to Stress Test Your Resolve in the Gold Markets

By: Jeff_Clark

The Casey Research Metals and Mining team has received a number of worried and angry emails about gold's recent rollercoaster ride. I'd like to respond to them.

First, I understand. I'm an investor, too, and I also manage money for family members. We have positions that are underwater, a few dramatically so. Worse, in many cases a full position had been built, seemingly leaving no room to average down and lower our cost basis. This predicament isn't fun, and there are a limited number of options.

However, instead of responding emotionally, let's look at some facts and consider their implications.

The drop in stock prices came with no drop in the quality of the companies' assets. This is important to recognize, because it highlights the difference between value and price, and points to opportunity. Even at lower gold and silver prices, the value of these companies is higher than they're currently priced. This will eventually correct, as all mispriced markets do.

Investors must be willing to hold through down or sideways markets to realize profits. The trend we're betting on took an unusually large detour, but it has not changed in any material way. It may take some time for the market to stabilize before it makes a significant move up, and with summer knocking on the door (often gold's low season), we could easily see the gold market remain weak for a few months. A huge rally in the immediate future is unlikely unless a black swan hits (for example, a deterioration in European sovereign debt, a sharply lower US dollar, bank failures, etc.). The message is that, like any market with favorable fundamentals, you must have the mental wherewithal to stay in the game, however painful, in order to seize a big profit.

A lifetime buying opportunity is shaping up. By any analysis, gold stocks are about as cheap as they've ever been. Therefore, focus on positioning yourself ahead of what we think will be an extraordinary reversal. The more spectacular the selloff, the more spectacular the opportunity – and this selloff has been one for the record books. We're witnessing a setup that only comes along a few times in an investor's life. Our goal is to prepare for it, not lament an unexpected trend interruption.

Be honest with yourself about risk and volatility. Investment decisions based on emotions rather than facts rarely work out. I know it's not easy, but look ahead and not behind. Stock prices don't care how you feel – and they still won't when the market reverses to the upside with you on the sidelines looking on.

The bottom line is that you've got to hang in there and let the big-picture forces guide your gold investing decisions.

It's only natural that investors who haven't experienced this kind of situation before might be wondering exactly what the big-picture forces are indicating today. To address that issue, along with the many other questions surrounding gold investments today, Casey Research and TheStreet have brought together some of the sharpest gold-investing minds around. They include: Doug Casey, legendary contrarian and speculator; Jim Cramer, founder of TheStreet and host of CNBC's Mad Money; and Steve Feldman, cofounder and CEO of Gold Bullion International.

You'll hear their thoughts on what's happened in the gold markets over the past two months... what is likely to be ahead in them... and how gold investors should position themselves. You'll get specific, actionable advice in this free webinar, so reserve your spot now. Gold: Dead Cat or Raging Bull? will premier on Tuesday, June 25 at 2:00 p.m. EDT. You don't want to miss it – learn more and register today.

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Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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