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« The Beginning of the End of The United States of Europe | Main | Kinross Gold Corporation: Sold Our Stake »

When to Sell Gold

Gold Coin 12 Nov 2010.JPG

By Terry Coxon, Senior Editor, Casey Research

By now you have plenty of reason to congratulate yourself for having boarded the gold bandwagon. The early tickets are the cheap ones, and you’ve already had quite a ride. The best of the ride, I believe, is yet to come, and it should be very good indeed. It should be so much fun that your wallet may start to feel a bit giddy – which can be dangerous. So it would be wise to consider, now, how things will be and how they will feel when the current bull market in gold reaches its “end of days.” Because it will end.

Buying at the right time is the key to building profits. Selling at the right time is the key to collecting them.

The 1980 Peak

In 1980, gold briefly touched the then record price of $850 per ounce. In terms of purchasing power, that would be $2,400 in today’s dollars. And for the value of the world’s entire gold stockpile to attain the same share of the world’s total wealth that it represented at the 1980 peak, the price would need to reach $5,800 per ounce.

But so what? Before you can look to those numbers for guidance about what the peak in gold’s bull market will look like, you need to consider how the process that drove the earlier bull market compares with what is happening today.

The earlier bull market was driven by price inflation in the world’s reserve currency, the dollar, that reached an annual rate of 14%. The more expensive it became to use dollars as a store of value (i.e., the more rapidly the dollar’s purchasing power was declining), the more attractive gold became as an alternative way to store value.

The dollar is still the world’s reserve currency. (And not just for central banks. Among individuals and private businesses that want to diversify out of their home currency, the dollar is still Number One.) And the force driving the bull market in gold is once again price inflation. But this time it isn’t actual price inflation that is on the mind of gold buyers around the world. It is the potential for price inflation that is building up. That build-up is coming from:
Rapid expansion in the U.S. monetary base through the Federal Reserve’s asset purchases. Most of that expansion has yet to be reflected in a growth in the U.S. money supply. It is still sitting, like a charge in a capacitor, waiting for something to set it off. There was no similar liquidity bomb stored in the U.S. economy's closet during the years leading up to 1980.
Unprecedented growth in federal government debt, which adds to the political attractiveness of price inflation. There were federal deficits during the 1970s, but nothing like today's – just enough to give the party out of power at any time something to talk about.
The accumulation of U.S. Treasury debt and privately issued dollar debt in the hands of foreign investors. U.S. debt to foreigners wasn't a factor in the years leading up to gold's 1980 peak. This time around, it could be a powerful force for accelerating inflation. Even moderate inflation could spook foreign investors. Their sales of Treasuries and other dollar-denominated IOUs would push down the foreign exchange value of the dollar, which would raise the cost of imports coming into the U.S., which would further stimulate price inflation. A nasty feedback.

And foreign holdings of U.S. debt operate as a second vector feeding the political attractiveness of dollar price inflation. Depreciation of the dollar can be framed as a clever way to shortchange foreign creditors. "It  hurts THEM, not US" would be the slogan.

All those factors are working to make price inflation distinctly more severe than it was in the 1970s, which argues for a higher peak price for gold. When the metal does surpass its 1980 peak in purchasing power, the event is likely to be widely reported in the press. I suggest that you not attach any significance to the event. It won't be time to sell.

Sell Signals

But the time to sell will come. Here are the signs I'll be looking for.

Gold and gold-related financial products will be commonplace.

Even today, most financial institutions still hold the "barbarous relic" attitude toward gold. Yes, you can get GLD through any stockbroker, but with a few exceptions, the brokerage firm's heart isn't in it. They offer GLD for the same reason even the best seafood restaurants have a steak on the menu – they know someone will ask for one, even though that's not what they are in business to serve.

Before the bull market is over, that attitude will change. Mainline brokerage firms won't just have gold-related products available, they will advertise them. They will boast about them. They'll claim to specialize in them. And it won't be just the brokers. Your local bank will offer gold-related CDs. Your insurance company may be offering life insurance denominated in ounces.

Gold going mainstream won't mean that the bull market is over, but it will be a sign that it's getting long in the tooth. An early warning signal.

You'll be hearing gold chatter wherever people talk about investing.

The inhabitants of Financial News TV Land will be talking about gold approvingly, and each of them will be trying to suggest he was early in recognizing the gold bull market. You won't be able to get through a golf game or a cocktail party without someone talking about gold. Even your brother-in-law will want to explain it to you.

The gold standard will become respectable.

Today advocates of the gold standard are seen as standing to the good side of whacko, but not by a big margin. But as gold attracts more converts in the investment world, the politicians will want to associate themselves with it by proposing some brand or other of gold convertibility for the dollar. Respectability for the gold standard will be a sign that a majority of the people who are going to buy gold already have.

Other things will look cheap to you.

When gold nears its peak, even if you suspect that that's what's happening, you won't feel certain about it. But when you start seeing investments – probably conventional stocks – that look like strong bargains, treat those sightings as a sign it's time to start selling gold. You know the reasons that led you to buy gold. If you are tempted to sell part of your holdings to buy something whose low price seems to give it better prospects, then you probably will be selling at the right time. You could be selling to the last new buyer.
With gold now over $1,400 an ounce, where do we go from here? To stay updated on the gold bull market and the strongest gold stocks… and find out how high gold might go… and be alerted when it’s time to sell and collect your profits… check out BIG GOLD – Casey’s monthly advisory on all things precious metals and large-cap gold stocks. At only $79 per year, it’s by far the best investment you can make. Click here for a risk-free 3-month trial with money-back guarantee.

On the skoptionstrading front some of our 'stops' were triggered this week sending us back into cash with some good profits, we will update the chart on the skoptionstrading site this weekend.

SK Chart 23 Oct 2010.JPG

The above progress chart is being updated constantly. However, to see exactly how it is going, please click this link.

So, the question is: Are you going to make the decision to join us today?

Stay on your toes and have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.

To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address. (Winners of the GoldDrivers Stock Picking Competition 2007)

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

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Reader Comments (14)

Time to sell gold is coming soon. The 1450 is the top and from here it is going to go below 1000, ending at around 350 in a few years, mostly traded against the dollar. I still have no sell signal but soon I think.

November 12, 2010 | Unregistered CommenterDi

Di, so good to hear from you again. How are those silver shorts panning out for ya? Still solvent?

Let's take a walk down memory lane and see how solid your predictions have been, shall we?


"Well i am calling for 320 gold. It is going to be the only asset that will not make a new low, but it will fall a lot from current level. Gold made a new final high at 1220 , sold off on huge volume and now it trades within a range respecting that high. The trend changed and now will last for about 2 or 3 years. Technically it is a very good bear trend, we are making lower lows and lower highs."

Comment by Di — March 22, 2010 @ 1:27 pm


This is a good one from April 30:

"Hehehe, just put a short on silver today at close. Could be the last high before going to 12."


Ouch...but not as good as this gem:

"i think we still going to see silver at 2.50 before it breaks above 20 bucks"

Comment by Di — May 17, 2010 @ 12:56 pm


And Di, I was happy to know that someone out there is smarter than Jim Sinclair:

"technicals on gold are deteriorating day by day. we only need to close below 1166 to confirm the weekly downtrend. Jim Sinclair is going to lose that one million dollar bet."

Comment by Di — June 4, 2010 @ 2:39 pm

Okay then. I'm sure we'll all be eagerly awaiting your "sell signal," because we wouldn't want to miss out on that slide down to $350.

By the way, where'd you learn technical analysis? KMart?

November 12, 2010 | Unregistered Commenterfallingman

And I thought Di had disappeared down the gold plug hole !!. What no short position ??
If inflation takes off interest rates will rise so is that not negative for gold ?

November 12, 2010 | Unregistered Commentergold bug

No. Only if rates rise faster than prices rise. The thing to look real interest rates - T bill rates minus CPI (or whatever you think is a better measure. It's the relationship between the "inflation rate" and the interest rates and the second derivative...whether the gap is widening or narrowing...that really matter. You have to go all Einstein on this and think in relative terms. The fact that rates are rising tells you little and portends little for the metals in and of itself.

Gold rose sharply as rates were rising in the late 70's. Go back and look at the charts. That's actually when the sharpest moves occured. The key is to watch what the weasels at the Fed do whn long rates start to rise sharply. If they pull a Volcker (spit now. he's the cretin who sold off our silver stockpiles for pennies) and raise short rates enough to actually create a positive real interest rate of any significance, they will completely and I mean completely collapse an economy that is leveraged not just up to its eyeballs but over its head.

Can't let that happen one would imagine, and so they'll continue to conjure up money from nothing and and keep the rates they control artificially low for as long as they can, which will destroy the clownbuck, which will lead to complete collapse anyway.



November 12, 2010 | Unregistered Commenterfallingman

Outstanding research, Fallingman...
Someone's done got snake bit, I do believe...tatood in a manner...
You go man!

November 12, 2010 | Unregistered CommenterSnakeman


Well said ... as always, you and Snakeman are a treat read.

Folks, I don't think fallingman could have put it any better/simpler. Seriously, if the gov't could have solved everything by simply raising rates leading to a strong dollar, don't you think they would have done that by now? Not a chance ... they don't want riots in the streets of America.

USA could very soon be called Japan ver 2.0, on a strictly economic basis of course - (I know I will piss off some by using that label).

Good luck all ...

November 12, 2010 | Unregistered CommenterTJ


In my next life Im gunning for a good memory instead of being devilishly good looking!

November 12, 2010 | Unregistered CommenterGold Prices

"Where did you learn technical analysis, K Mart?." HAHAHAHAHA. A beauty. On a more serious note, the real problem is there will be no other store of value to compare to gold simply because gold will entirely or in part be a basis for currency. So many pay lip service to the 'GOLD IS MONEY" mantra without believing it, when one does then one understands that gold is not sold for dollars but dollars are bought with gold. Then the speculation is on the dollars purchased not on the gold sold. In terms of gold nearly everyone has become poorer during the last ten years and that appplies to Bill Gates, George Soros et al. Ofcourse in currency, many have become richer but if one wants to look at the real world and understand that gold is money then there has been severe deflation in mostly everything else. The current money printing is an effort to supply enough of the paper rubbish to enable sufficient liquidity to reach an equilibrium price with gold. That is the reason why not only will the bull market in gold never end but also the reason why gold is going to 50,000 dollars an ounce and the equivalent in all other currencies, Once gold reaches an equilibrium price with paper currencies then gold will be used as the standard and not any other paper currency. Incidentaly when I first mentioned that gold was going to 50,000 dollars an ounce it would have been a rise of fifty times, now it is only thirty eight times, not so much when one realises that gold has risen by seventy two times in the last ninety years. Think about it, drip drip drip, day by day, seventy two times. Maybe Di did not explain herself clearly, I am sure that what she means is that gold will be $350 an ounce after the current dollar has been replaced with "NEW" dollars at the rate of 10,000 "OLD" dollars to one "NEW" Dollar Roger Levinson.

November 14, 2010 | Unregistered CommenterRoger Levinson


Thanks for tuning in, you appear to have created some banter and commentary, which ia always appreciated, otherwise theres not much point in hosting a site.

November 14, 2010 | Unregistered CommenterGold Prices

True enough, but it appears Di is preaching to the wrong choir...for some time now...perhaps he/she should consider bloging on the "The US Dollar is Safe" website...I dunno...I don't believe anybody here actual enjoys harsh words with him/her...Snakeman

November 15, 2010 | Unregistered CommenterSnakeman

Roger makes the critical point. Gold is the center of the monetary universe. To think in terms of gold (real money) vs. the clownbuck (make believe money) as your reference point requires some mental shifting, however. And that shifting is like patting your head and rubbing your stomach and then having to switch. We're conditioned to think in terms of price per dollar.

There is a huge bubble out there and it sure as hell isn't in gold. It's in dollars...the quantity of dollars...and the mirror image of that bubble is a "rising" gold price. Yeah, rising in dollars...BECAUSE THERE ARE SO MANY OF THEM OUT THERE. Hello! And more coming every day.

Gold and silver are money. Accept no substitutes. You may have to do so in the marketplace as a practical matter, but don't pollute your mind with dollar-think. Measure your wealth in terms of gold. Figure how much stuff costs in terms of gold. When you want to be safe in cash, think gold.

November 15, 2010 | Unregistered Commenterfallingman

OK ... I am just gonna say it cuz I don't think I can hold in this question anymore:

Why does it feel like another major World War is upon us?

Fine - call me crazy, call me Chicken Little, whatever ... but I can't help but wonder for the last 2 years or so that something bad - really bad - is going to happen globally that is man made ... forget Dec 21 2012, or aliens, or asteroids, or Mother Nature going 'medieval' on our A$$es - it is definitely more plausible that man will '@#%! $hit up' before any of the other events I mentioned.

Look around - other than China and India, every other nation is getting pummeled economically, and it will be a matter of time when the gov'ts of these nations put a name/face to the root cause of these problems, OTHER THAN THEMSELVES, so that the general public doesn't go into lynch mob mode and hang their officials on the gallows ... isn't the current social and economic environment similar to those before the other two WW's?

Did I miss anything?

You should all know that I am generally an easy going person, and very patient, and I don't subscribe to the conspiracy theorists - I don't like to preach or profess - but my opening question at the beginning of this post is starting to percolate, especially since I am a new father for the first time - I need some hope for the future but I don't see it, at all, at least for the western world.

Somethings got to, and will, give ...

November 16, 2010 | Unregistered CommenterTJ

Wow, the value of gold per ounce at present is sky-rocketing! The lucky ones are the gold investors who took a lot of gold investments for the past three decades. That is big money now!

December 1, 2010 | Unregistered CommenterBuy Gold

The future is deflation. Nobody is buying anything, therefore prices must go down to encourage purchases, but the problem is: everybody's credit cards are maxed to the limit. The economic gurus got to come up with some big blockbuster like mutliple credit cards with high limits to keep this bubble going. Maybe they'll come up with the "zero-chopper". You buy one "zero-chopper" and it allows the owner to chop the last "0" off his debt. Wallah! A debt of $50,000 magically becomes $5000, and away we go again. Demand for gold will rise again.

December 2, 2010 | Unregistered CommenterLuck Chong

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