If you examine investment patterns over time, you will find that as soon as the overall mass interest in an investment turns completely dour, that’s when that investment begins to take off and outperform other investments. Conversely, if the overall mass opinion on a certain market or investment is wildly popular, it may be time for the wise investor to start backing away because that market is likely due for a correction. Being what is known as a “contrarian” can appear to be risky and often counterintuitive, but it is based on recognizing the P/E ratios and determining, which asset class has been suppressed below market levels. Today, the asset class that has had a very bad run over the last couple years is gold. Gold has gotten a bad rap among investors because of the major losses it has incurred, however, if you look at the current price on gold and the overall investor sentiment towards gold, everything is pointing towards a gold comeback.
Buy Low And Sell High…This Principle Works For Gold Investments Too
Warren Buffett wasn’t joking around when he urged his followers to buy low and sell high. In fact, the majority of wealthy investors have made their millions (and billions) utilizing contrarian principles. So looking at the markets today, which asset class has fallen out of favor? If you examine the level of pessimism felt towards different investment opportunities, 0 being pessimistic and 100 being in favor, gold actually registered a “0” on the pessimism scale in December. In conjunction with the overall pessimism towards gold, gold price-to-earnings ratios were at the lowest level they have experienced in 14 years, and are down half of what they were at the peak of the most recent bull market.
Gold Has Hit It’s Bottom
There are countless of charts indicating that gold has likely hit its “bottom”. For instance, in a chart by Frank Holmes at U.S. Global Investors, it showed that gold’s 60-day percent change is at its lowest ever. In addition to this, the U.S. global Investors tracked gold and silver and have found that consecutive annual declines in the gold market are extremely unusual. That being said, last year’s decline for gold was one of the greatest declines on record.
How Certain Is A Gold Comeback In 2014?
There are no guarantees in life, but if history proves itself correct, an asset class can only stay out of favor and suppressed for so long. Gold typically does not have years of consecutive losses and it is rare for gold to sell as cheaply as it is today, given the cost of mining and production. In fact, it’s probably not so much an issue as “if” gold prices will go up, but more so a matter of “when” we can expect an increase in gold prices.
For more information on gold as an investment, and on which area of gold investing is expected to get you greater profit potential looking forward, speak to a Redhawk Wealth Advisor near you today.