A questions was recently asked: How do I know when to sell my gold?

The DOW/Gold ratio has historically proven to be a pretty accurate indicator of when gold has topped.

This does of course require a “functioning” market. Stable and functioning are not the same thing. It could be argued that the last few tops in gold didnt necessarily occur during a “stable” market.

DOW/Gold ratio aside however, there are a few other indicators that we can use to gage if it has topped.

My favorite by far is the “everyman” indicator. When everyman is singing the praises of gold and silver, and that it is THE investment, then you will know that its time to sell.

Examples:

* The shoe shine guy in the airport is giving you gold and silver tips
* The cab driver is giving you gold and silver tips
* You see gold all over the cover of time magazine
* There are more gold websites and advertisements than there are forex websites and advertisements
* Grandma who knows absolutely nothing about financial wealth building is giving you gold tips
* There is an entire industry that grows up around selling gold (like the lead up in real estate agents, mortgage brokers, and everything to do with real estate leading up to the popping of that bubble)

Etc.

In the event of a hyper-inflationary environment, I wouldn’t sell gold AT ALL unless it was in exchange for property such as during Wiemar. I have read you could buy an entire City block in Germany with all the commercial buildings on it for 20 ounces of gold at the height of the German hyperinflation.

Aside from something like that, why would you redeem gold into a hyper-inflating currency? Makes more sense to just sit on it, and redeem some of it when great opportunities arise to invest in real tangible wealth growing assets.

This entry was posted on Saturday, January 3rd, 2009 at 1:12 pm and is filed under Archived. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.