Everywhere you look right now, you see advertisements about gold. There are commercials telling you to buy gold now, invest in gold bars or coins, and sell your scrap gold. The say things like “There has never been a better time to own gold!” And they are absolutely right! There has never been a better time to OWN gold; but that doesn’t mean that you should be buying gold now.

If you own gold and have owned gold for a while, then you are feeling really good right now and this is the best time for anyone to own gold. One thing that always seems to happen, regardless of the investment vehicle, is the “smart money” buys in early when no one wants it, and the “suckers” or non-sophisticated investors buy in just before the crash (when the smart money is selling). One sign that the party is nearing an end is that everywhere you turn, it is being talked about. So if you are not already in gold, this may not be the time to buy. If you have owned gold for a while, it may be time to start taking some profits.

The whole reason for investing is to make money. One secret to being a successful investor is being a disciplined buyer. Successful investors whether it be, real estate, stocks, commodities, businesses, or anything else know that you make your money the day you buy, not the day that you sell. There is one other discipline that is just as important if not more so than buying discipline: The discipline to sell. Armature investors get caught up in the excitement or fear of the moment. It is very prudent to sell a portion of your holdings when the price gets ahead of the demand.

I know you’re saying, “Gold is a commodity and they aren’t making any more of it, so won’t it always keep going up?” Perhaps, but I also believe that if you “lighten your load” now, you will have an opportunity to buy it back cheaper a little later down the road. That is a great point for anyone who does not already hold a position in gold. I would identify a price point that would be a bargain to buy gold (or anything else) at and have the discipline to refuse to pay a dime more. If it does not come back down to your price after time, then you can reevaluate what you believe to be a “good price.” I would rather miss an opportunity because I feel that the risk is greater than the reward, than chase it and get burned. Personally, I think gold will reach $1100 an ounce and possibly as much as $1200 an ounce, but I believe that the time-frame to ride the gold train is almost up, at least for now.

To make an informed decision on the future of gold, you must first have an understanding of what moves the price of gold. First of all, the dollar has a lot to do with it. Inflation is a term everyone has heard, but many do not really understand. Inflation basically means the value of the dollar is decreasing. It means that $10 bought you a lot more ten years ago than it will today. It is why my parents have stories of filling up their car for $5 or less, and today I can’t fill my tank for much less than $40. When the dollar decreases in value, gold increases. Right now interest rates are extremely low and the US government is printing money like crazy, driving up the deficit, which is killing the value of the dollar. That is a big reason that gold is closing in on $1100 an ounce.

Gold has been known as a hedge against inflation as well as a falling stock market. That is why almost all investment professionals recommend having a percentage of your investment portfolio in gold. When the stock market is volatile or declining, you will often see the price of gold rise because the law of supply and demand. When there is fear and uncertainty in the market, many investors flee to gold; because it is a tangible commodity (remember they’re not making any more of it).  That creates an increase in demand, which causes a decrease in supply and an increase in price. This brings up another point. Days ago, India bought a ton of gold which created a significant increase in demand. That coupled with the dollar reaching a technical resistance level (which means it would probably be on the way back down), drove the price of gold up over $30 in one day.

I do think gold has more room to the upside but something is coming that is going to cause a massive pullback in gold. The Federal Reserve will be forced to raise rates, somewhere in over the next year, to defend the dollar against inflation and possibly defend its position of the leading world currency. When the Fed begins raising rates they will probably move quickly which will raise the value of the dollar and kill the price of gold. That will be your opportunity to get in it you missed this one!

The reason that it will be the opportunity is because the government’s actions of bailing companies out by printing trillions of dollars and increasing the deficit to unimaginable levels will inevitably cause massive inflation. All these companies are telling you to buy gold now, is because they need to create the demand that will allow them to unload their gold without driving down the price. If you feel like you are missing the boat on gold, don’t buy now! Wait for the crash and then take your shot.