[Kirkland]

Good afternoon guys,

I'm relitively new to trading, I've been following it now about six months as in the future I aspire to work in the financial industry and will be going to university within the next 24 months.

I spend alot of time learning technical trading and specifically forex "paper trading" just to get an understanding for financial markets. I spend alot of time reading trading literature and learning about the trading pyche. I also surround myself with veteran traders on a number of forums, IRC, etc, where I gain alot of knowledge.

Over the past 2 months I've been watching the "Gold Rush" and seeing it go from sitting a little over $1,000 USD and then rushing upto $1,200 in quick succession and I'm curious if I should invest into gold. Alot of the chartists (not just bullish people who love gold) suggest it'll continue running untill atleast 1,300 as per technical analysis and of course alot of the bulls have been saying outlandish claims like 3-5k USD over time.

Now, I've spent alot of time trying to understand the US financial markets and have noticed the corrolation between USD and Gold watching the EURUSD FX pair with the USD depreciating. However on Friday there was a hiccup on Gold where it lost it's last weeks earnings due to the release of lower US Employment figures than expected, and also USD gained on almost every pair in FX.

Now, I did notice just before close of play yesterday gold (and also all the FX pairs) had started to go back up as the USD fell close to the end of the days trading. I realise the USD is getting weaker and weaker with the fear of inflation due to the flood of cash into the economy but I also realise there is going to be several fed meetings this month which may lead to higher interest rates.

My questions to you are:

Should I invest $2,000 USD with a leverage of 100:1 into Gold at the moment? I wish to create a 1 year investment that has the potential to earn a good return, and after watching gold this past couple of weeks I believe that it has the potential to do this.

Side note: I realise all investments carry risk, the reason I ask is your current views on the gold market and if its at the top of a bubble or a 5 year bull run we've only just entered into.

 

[Berubeland]

So you'd like us to predict the future with our superpowers and tell you about it?

Here is my list of predictions for the future.

Water will continue to flow downhill.

Some People will continue to be nasty to each other and some people will be incredibly kind and generous

Time will continue to flow inexorably in the same direction.

Notice that gold is not one the list, sorry about that I tried very hard.

 

[Kirkland]

So you'd like us to predict the future with our superpowers and tell you about it?

Here is my list of predictions for the future.

Water will continue to flow downhill.

Some People will continue to be nasty to each other and some people will be incredibly kind and generous

Time will continue to flow inexorably in the same direction.

Notice that gold is not one the list, sorry about that I tried very hard.

Comedian

Rather than predict the future I was hoping on receiving a reply based on past events and past experiences and then translating those into comprehensive thoughts on the issue, however, I do occasionally accept the odd trolling and comedian.

 

[Berubeland]

Ok.

I think that too many people are buying gold right now.

Gold was good before you knew it was good now it's very risky. Yes it may continue but it is already an asset bubble. When everyone at the water cooler knows about the record gold prices the bus has left the station already.

Pick an unpopular investment..... invest...... wait.

 

[brad]

I agree with Berubeland.

Of course gold has the potential to gain in value. It also has potential to fall. Once people start noticing that something's going up and jump on the bandwagon, it's usually too late; you're better off looking elsewhere.

Every autumn, I used to go to the top of a mountain and watch the hawks in migration. There would be a good crowd of other hawkwatchers there, and whenever they were looking at some big eagle or something off in the distance, I always made it a point to look the other way to see what they were missing. I made a lot of good sightings that way, and built up a reputation as a good observer.

I used the same approach when I worked as a journalist, and got a lot of stories that the big crowds of journalists missed. You could read 10 publications and read the same story from 10 different journalists, but my story stood out because nobody else had covered it.

A similar strategy can work in investments. You're better off not running with the pack.

 

[humble_pie]

when she was covering the tumultuous middle east, distinguished television journalist Ann Medina used to say that each morning when she emerged from her hotel in a war-torn city to cover an official event, if the crowds of ordinary people were heading in the direction that was opposite to the scheduled event she would unhesitatingly follow the crowds.

and she got great stories.

re gold: looks like they were long gold & short pr met miners.
now that's just begun to reverse.

 

[Berubeland]

Here's a stock I like a lot.

TC - Tucows

http://www.canadianinsider.com/coReport/allTransactions.php?ticker=tc

The company principals are buying this stock and keeping it. It is a legitimate company that makes real money but not in web advertising which I think is way over valuated. Who clicks on that crap anyways? When I looked into it they actually host my website.

I bought 1000 shares at 37 cents. Since then they have doubled. This summer there were 4 share buy backs.

For now I am holding on.... and thinking about buying more.

For all you gurus out there what do you think of this stock? Kindly tell me what is wrong with it ... before I buy more lol

 

[Berubeland]

Their website

http://tucowsinc.com/

 

[leslie]

"With a leverage of 100:1 I wish to earn a good return."
I have no idea where gold will go. But more important is the basic investment thesis. There is NO WAY that you should expect only a 'good' return in exchange for the risk of 100:1 leverage. You should ONLY do this when you are very confident of a GREAT return.

 

[Kirkland]

Hey,

Well I'm semi confident of a great return, this is why I'm trying to re-confirm it with other peoples thoughts on where they believe gold will go. I'm actually happy I've got objective replies and not just filled with the bulls shouting from the rooftops its going to 5k or something stupid.

My plan, if I am confident enough to enter is to enter on an uptrend day and then place a stop where I entered therefore in a "free trade" and once it's excelled passed that adding a trailing stop to secure profits.

 

[Sampson]

There is NO WAY that you should expect only a 'good' return in exchange for the risk of 100:1 leverage. You should ONLY do this when you are very confident of a GREAT return.

Agreed, even betting on the Leafs to win the cup gives better odds.

 

[takingprofits]

I can't comment on your leverage technique as I don't use leverage or margin. In my view the most likely scenario for gold is that we have seen the top for the near term and that it it will trade sideways in a range for a while and not make a monster move up or down for the time being. It can be choppy in that range so you need to ask yourself how your speculative bet will behave in that environment.

My two cents.

 

[Potato]

"With a leverage of 100:1 I wish to earn a good return."
I have no idea where gold will go. But more important is the basic investment thesis. There is NO WAY that you should expect only a 'good' return in exchange for the risk of 100:1 leverage. You should ONLY do this when you are very confident of a GREAT return.

Hey,

Well I'm semi confident of a great return,
[...]
My plan, if I am confident enough to enter is to enter on an uptrend day and then place a stop where I entered therefore in a "free trade" and once it's excelled passed that adding a trailing stop to secure profits.

With 100:1 leverage, you don't have to be confident of a "great" return so much (the leverage can turn a modest return into a great one), but absolutely positive that you will not have a negative return. A decline of 1% wipes you out. On Friday gold lost what, 4%? In one day. A 1% loss can happen so fast that your stop loss order will probably not save you with that much leverage, especially if you're going to be holding for more than a day (e.g., if you had bought at the close on Thursday and set your stop loss there, the very first trade on Friday would have stopped you out at a 1.4% loss).

I'm not real keen on gold as an investment myself, but don't feel strongly enough about it to really engage in debate on the subject or do extra research on it... but leverage of 100:1 is real easy to have strong feelings about, and with that much borrowed money on something as volatile as gold it's really more of a gamble than an "investment".

Besides, who's even offering that kind of leverage? Are you planning on taking out a $200k personal loan?

 

[humble_pie]

this thread is going every which way, but here's to B w the 2 cows: you've doubled your money in a few short months & you asking what's wrong ?? girl, you so obama. We should all be so lucky.

i looked at this thing. Not long, because i never waste any more time after i hit a big snag. I remember the systems manager at my local library enthusing about tucows in the 1990s. It was, and is, a talented, decent company.

but look at the red flags now. No volume. Institutions won't touch it. No growth. No life.

glance quickly through yahoo message board on this stock. There's trouble here. What is the MM doing. Somehow this stock fell into bed with the wrong kind of people. Not necessarily the company, but the stock. Penny stocks do sometimes get hijacked by hucksters and there's nothing a decent company can do about it.

the buybacks? and also couple insiders exercised options during the summer but didn't sell? normally these are bullish signs. Maybe they're preparing for a hostile takeover.

i wouldn't stay in this stock, there are so many healthy companies out there with strong, clean, happy stories. I'd sell my original investment plus 10-20% and take my money to something less spooky. I'd keep the freebie shares, though, in case a takeover does materialize.

don't forget to keep us informed how the cows get milked, at the end of the day.

 

[Murph]

Ok.

I think that too many people are buying gold right now.

Gold was good before you knew it was good now it's very risky. Yes it may continue but it is already an asset bubble. When everyone at the water cooler knows about the record gold prices the bus has left the station already.

Pick an unpopular investment..... invest...... wait.

I tend to agree with Berubeland, gold might have a ways to go but it's starting to look like a bubble to me. You see gold bulls like Peter Schiff saying that gold is going to 5000 an ounce and the U.S will experience Weimar type inflation but if that scenario plays out sitting on gold bars will be the least of your worries . Anyhow, I have read that Silver is a better investment in the long run.

 

[bean438]

Personally i would not invest in tulip bulbs, er I mean gold.

It has no value, does not produce any income and is only worth what someone else is willing to pay.

The greater fool theory. I think too many people are buying. Actually my barber was "thinkin bout buyin sum gold".

Isnt that one of Peter lynch's warning signs when your barber is tsalking investing in something.

 

[dogcom]

The US dollar will be long gone and gold will still have value. You can't just mouse click or print more of it. It is most valuable when we go through a crisis every 30 or 40 years. Having said that you don't want to own it most of the time because it doesn't pay you to hold it.

 

[Kirkland]

Hey guys,

Thanks for all the input I appreciate it. As I said in my initial post I'm a new trader and I am learning as I go, obviously one of the things I need to learn more is the psych and control of emotions. My original decisions on Gold were greed based and the herd mentality, I've decided not to invest and just watch the charts and see how it pans out. As people have said previously in this thread its probably best to just find an investment and sit on it for the future.

Thanks.

 

[HaroldCrump]

The US dollar will be long gone and gold will still have value. You can't just mouse click or print more of it. It is most valuable when we go through a crisis every 30 or 40 years. Having said that you don't want to own it most of the time because it doesn't pay you to hold it.

Is it only me, or does anyone else believe that any investment if held over extended periods of time (in decades) will only provide flat and average returns.
In the end, all investments tend towards the average over the long run.
Holding gold, other commodities, bonds, equity etc. for decades, without taking advantage of markets upswings and downswings, will return the same return as the average growth of GDP (actually NNP) of free-market trading world.
The only way to do better than the market over the long run is to buy during low points and sell during peaks.

 

[Murph]

The only way to do better than the market over the long run is to buy during low points and sell during peaks.

This is a lot easier said than done. I think buying when things are out of favor (i.e on sale) is a good rule of thumb but timing peaks is very hard. Or you can buy stuff that is badly discounted only to see it dwindle further (like the poor suckers who were buying stock in 1930). I prefer to index and dollar cost average, at least I can sleep at night.