I have a friend who really likes betting on sports. He will watch and bet on certain trends – such as consecutive wins at home or a streak by a certain pitcher.
Taking this strategy to investing, which is really just another form of gambling, we see a trend in the gold market. Considering the chart below, since the 1960s gold has fallen more than 30% over 3 years 4 other times. Each of these times have marked a bottom in gold and the price began to appreciate shortly after. Here are the 4 instances:
- in middle of 1970s the 1 year rolling performance fell by more then 30%
- in early 1980s both 1 and 3 year rolling performance fell by almost 40%
- in middle of 1980s the 3 year rolling performance fell by more then 30%
- in late 1990s the 3 year rolling performance also fell by more then 30%
Now we all know the price of gold could fall further but that fact remains in my head… The downside is limited and outside of a short term perspective the upside is far more likely.
Click here for the post that brought this to my attention.