By Tony Davis
As of this writing, gold and silver are seeing a fairly
strong pullback from what otherwise has been a stellar year for precious
metals. Reasons for the recent sell-off
in the commodities market are being attributed to the Greek election results, a
pullback in the Swiss Franc and a strengthening dollar. Regardless of the day, there are many factors
at play that can affect the price of gold and silver. If the past is any indication, we’re likely
going to see some irrational behavior falling this recent sell off in the
precious metals market. As a seasoned coin dealer, we’ve had the opportunity to
witness bull and bear markets first hand and believe that we have some insight
to share that may be of value to bullion and coin collectors in hopes that they
can avert making some costly mistakes.
In this article, we’re going to address three points or guidelines that
all investors should consider prior to making any decisions that they may
regret in the future.
Don’t Panic!
First and foremost, don’t panic! Making knee jerk reactions or panicking in a
falling market could be hazardous to your financial health. While it’s perfectly natural to feel uneasy
during a market selloff, we recommend that you put things into perspective
before making any decisions one way or the other. If you have a long term investment horizon
and don’t plan on cashing in your gold and silver coins anytime soon, a dip in
the market should not be seen as a negative, but rather a positive. Look at this as a buying opportunity to add
to your holdings while gold and silver are on sale. On the other hand, if a decline in the market
has caused you to realize that you don’t have the appetite for the volatility
of the precious metals market, pare back your holdings to a level that you feel
comfortable with and try to avoid regularly checking the spot price of gold and
silver.
Don’t Try to Time the Market
While there are some people that have the ability to accurately
time the market, 99.9% of us don’t know what the price of gold and silver will
be on a daily, weekly or even monthly basis, so it’s best to avoid timing the
market, whether it be on the upside or downside. If you’ve been waiting for a pullback in gold
and silver before entering the market or adding to your current holdings, take
advantage of this opportunity now. Don’t
wait in hopes that prices will drop lower and that you’ll be able to acquire
precious metals at the absolute bottom.
Rarely does this ever happen.
Furthermore, available supply tends to dwindle quickly in a falling
market, so even if the spot price of gold and silver does happen to drop
further, it’s likely that there will be reduced inventory available, which
could cause a spike in premiums. In
fact, we saw this very situation in the first quarter of 2014, when American
silver eagles and 90% silver coins were difficult to come by at nearly any
price.
Honor Your Commitments
From a coin dealer’s perspective, honoring your commitments
is absolutely the most important thing that you can do to maintain and build your
relationship with a coin dealer. While
it can be painful at times, it will pay dividends in the future. What do we mean by honoring your commitments? If you have come to a verbal agreement with a
coin dealer to buy or sell coins or bullion at a certain price, you should
follow through with that commitment, regardless of what the price of gold or
silver has done since the agreement. It
cuts both ways. Over the years, we’ve
found ourselves selling coins at well below market rates because we agreed to
rates in advance with a customer. Customers
who honor their commitments are held in high regard by coin dealers, which will
likely translate into early access to new and popular products as well as
preferred pricing.
Summary
In summary, falling gold and silver prices can be painful,
especially if you haven’t experienced a sharp selloff before, but it’s
important to keep things in perspective.
As discussed above, it’s important that you don’t panic. Take a step back and objectively evaluate
your position before making any decisions.
Secondly, don’t try to time the market.
No one knows for certain where the price of gold and silver are going in
the short term. If you view falling
prices as a buying opportunity, act now, rather than waiting to see if prices
fall further. Lastly, be sure to honor
your commitments. Not only will you earn
the respect of your coin dealer, but you’ll also likely receive preferential
treatment, such as early access to new inventory and preferred pricing.