> Rules when buying (or holding) Gold and Silver Stocks

Rules when buying (or holding) Gold and Silver Stocks

Posted on Monday, November 12, 2012 | No Comments

Today we will discuss three "golden" rules regarding debunked myths around these two precious metals.

Let's first define what volatility is, as mentioned on investopedia:

"1. A statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. Commonly, the higher the volatility, the riskier the security.

2. A variable in option pricing formulas showing the extent to which the return of the underlying asset will fluctuate between now and the option's expiration. Volatility, as expressed as a percentage coefficient within option-pricing formulas, arises from daily trading activities. How volatility is measured will affect the value of the coefficient used."

This is basically saying that volatility = risk, however volatility does not equal risk when considering gold and silver stocks. This is because banker cartels can easily manipulate the price volatility of gold and silver derivatives. This in actuality has nothing to do with the actual physical supply and demand of gold and silver. Hence, in this case, volatility is not a valid indicator regarding risk.

Next, it is absolutely imperative that you have patience for small upcoming companies to come out on top. A huge mistake that investors can make is immediately selling out after the price dropped. Gold and silver's volatility is NOT an indicator for actual risk. It is in many cases artificial, so you have to be patient for the price to rise again. For example, a gold company in the great depression lost 50% of its share price, everybody sold out, and then for roughly 6 years it earned 1258% of its share price a year. Patience is a virtue.

Typically, when gold/silver have a low risk high reward setup, the news, bankers, etc are very likely to say there is no opportunity. This is a decent point to buy in, since there's a fair chance risk is actually a lot lower than it is made out to be. Conversely, when silver/gold prices are rising, many will try to persuade you (directly or indirectly) to purchase stock. Interestingly enough, right after this, the price will drop a ton. This is all based on historical evidence.

So in conclusion, this all sounds like a conspiracy theory, however as I mentioned above it's based on factual evidence. Good luck!

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