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A Rainbow for Gold?

SOURCE: [Gold Speculator] - Woe is me! The market is falling! When will it all end? Many who own gold and silver are losing sleep over the current downturn in precious metal prices. Some are ready to sell their long term holdings, for fear the market has yet to bottom and prices will continue to fall. The abyss seems bottomless. All hope is lost.

Well, things may not be so dire. The end of the world may not be so close at hand. There are forces building that will serve to propel gold and silver prices to new highs. Gold and silver are at attractive prices for bargain hunters who may be more cool-headed than the throngs of amateurs that rush to sell at the intermediate low.

It is human nature to want to conserve what a person has earned. For most retail investors, the immediate reaction during market downturns is to sell. Fear overtakes reason, and selling begets more selling. Prices tend to change much more quickly when the electronic trading algorithms take over, followed quickly by the cowardly crowds. These are the same retail investors, by the way, who tend to pile in at market tops, afraid to miss out on the big score. But most retail investors get it exactly wrong. They sell low and buy high, the certain way to go broke.

Why do so many people give their money away to the markets? It has as much to do with training, specifically the lack of training and discipline, than psychology. Fear and greed may be the great motivating emotions that drive the market, but control of fear (and greed) through training and discipline allows the investor and speculator to profit in the markets while others fail. This is true for any market. The trick is to learn to act apart from the crowd, move contrary to the path of the mob. The mob is motivated by fear and greed. The contrarian investor takes advantage of the untrained mob by selling to them when they jump in at the market top, and buying from them when they are compelled to sell at the market bottom.

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