If you’re speculating on the gold price, those sorts of big sell off are pretty important to you. It’s like that with stocks, too. If you spend most of your time trying to trade short-term breakout or pullback share price movements, you need to watch your charts or quote.

Lots of traders who learned Volume Spread Analysis (VSA) – click link make money doing this kind of short term trading or speculating. One of them is our friend, Gavin Holmes, CEO of Tradeguider, student of Tom Williams, VSA Inventor (click youtube link). Gavin, a VSA trader can be both bullish and bearish on gold depending on which view point – timeframe and purely on the price and volume actions.

Here is where Gavin and we are different. We take a longer-term view on gold investing. We are only interested in gold as a long-term holding. Gold (and silver) is how we protect my downside from the irresponsibility $$$ printing by US politicians. Bill and myself buy the M’sian Kijang Gold coins or Gold physical ETF on a fairly regular basis. Overload with cash or currency is not wise too.

Once we buy my gold or silver investment, we view it as a hedge against losing value of currency. Look at them in term of 3-5 years from today. Not 3-5 days (trader like Gavin looks to – very short term basis). And once we owned this gold investment and we know it is safe.

Remember, for 5000 years gold has always beaten fiat paper currencies. I do not think this time will be any different. Fiat currency only has value on what the government decreed upon (ie. what it say).

Investing in gold requires a cool head and correct discipline. We often tell gold investors if you can not stomach the volatility you should avoid this market. You must allow for at least a USD 200 correction. Gold speculators would benefit from this kind of market volatility.

Here is the bottom lines.

• Daily prices would fluctuate between 3-5% for gold futures.
• The US Fed will not stop printing U.S. dollars!
• The US government has $15 trillion of debt that it cannot repay. Click link for my earlier posting – Aug 2011 Stock Market Comment.
• There will be lots of investors and people who want to keep their cash away from the stock market and piled them under their pillows. The cash feeling make them feel good. However, it does not preserve the value of their savings.

• Central banks are biggest buyer now.

Yes, the gold price has fell from the high @ USD 1920 to less than USD 1572 (negative -18% drop) and many weak hand holder of gold investment got hammered.

Many of these investors immediately exit and enter the market as if their investment agenda is dictated by the media or a more powerful force in play.

If you don’t the discipline, don’t invest in gold. You would have missed one of the best investment asset class – precious Gold.