The Alchemist: Gold Fever

Posted in Money Matters on August 10, 2003

The following is this week’s installment of The Alchemist, a column by Mensan Al Thomas, author of If It Doesn’t Go Up, Don’t Buy It. Click ‘Read More’ below for this week’s article, “Gold Fever.”

The Alchemist: Gold Fever

by Al Thomas


Right now there doesn’t seem to be any “gold fever”. Very
few are out looking to strike it rich in this sector.


Way back when at Sutter’s Mill in California the
discovery of gold was accidental. One of Sutter’s employees picked up a
shiny stone out of the stream and suddenly the fever caught everyone.
Gold fever is one of the most catching and dangerous “diseases” that has
afflicted man since the beginning of time. Many have died or gone broke
chasing this elusive element. We are about to see it happen again. The
first ones to catch it usually do very well, but as the fever spreads to
the general population the affliction mutates to fear of not getting
their share and ends with disaster.


Those who understand the cycle of fear, yes, that is what
it is, do manage to control their emotions and do very well. At first
the logical, thinking people realize that everything is in place for a
long term bull market so they mine (buy) early. As they continue to
become richer and richer others see their success and start staking
claims. Even these later comers do well as the hoard descends upon the
gold fields and the early birds are happy to accommodate them by selling
them part or all of their claims (stocks and bullion).


The early birds do not become emotional about their good
fortune and do not become so attached to their mines that they refuse to
sell. They have the good sense to realize that if they hold much longer
there will be too many chasing this good thing so they sell. Every rich
man in history will tell you that the secret of success is knowing when
to sell.


Those who bought the original tulip bulbs from Holland
and land in the South Pacific and saw the prices begin to erode and sold
were the ones who remained rich. From 1982 to 2000 dot.com stocks made
everyone think he was a financial genius. Those who had no exit strategy
were buried in the avalanche of cascading prices for the next 3 years.
It seems that many have not yet learned their lesson and are buying more
of the same junk with the hope that it will go back up to the old high
prices so they can get out “even”.


Those who came late to the gold rush went home with little
or nothing and most lost money. If you want to participate in the coming
gold bonanza you must get started now.


Copyright Albert W. Thomas. All rights reserved. Author of “If It Doesn’t Go Up, Don’t Buy It!” www.mutualfundmagic.com. Comments to al@mutualfundmagic.com.