Gold – When to Exit? $2k, $5k, $10k?

When clients ask about the timing of selling their gold, I generally respond to their question with a question: “Do you have upcoming liquidity needs?” or “Is there a productive investment opportunity to deploy your capital?”

Understandably, clients will find these responses unsatisfactory, as I failed to delve into the core of what they’re asking.

Especially with gold hovering slightly above or below the $2,000 price level, many clients seek guidance on the ideal ‘exit’ point quoted in dollars—a holy grail that promises certainty in the decision-making process.

This is where I tend to challenge clients to view gold differently.

Fixating solely on a USD perspective, I argue, is the wrong mindset. Physical gold isn’t just a speculative tool for market timing.

Gold eliminates counterparty risk and acts as a true safe-haven piggy bank. Gold is money.

Charles Vollum from pricedingold.com has it right, emphasizing the importance of viewing gold not in terms of dollars but having dollars measured in gold. It’s the ruler against which to measure the value of all other assets.

The tempting aspect is to perceive gold through the lens of the USD. One might argue this is understandable, considering the adage ‘The borrower is servant to the lender.’ If someone has USD liabilities, it’s likely that they are contemplating everything in terms of USD.

However, despite societal norms to measure wealth and financial plans in USD, the glaring issue arises when examining the price chart of any asset or commodity quoted in USD over the last 50 years—the dollar ‘value’ is almost certainly higher.

This is because of systemic inflation, and it calls into question the dollar’s merit for assessing productivity and growth through dollars instead of gold. (I touched on this point in an older post here).

To illustrate, it’s like measuring a mountain peak’s height through the point of view of a driver’s car window while driving and approaching a mountain. The apparent size grows not because the mountain is rising, but due to the dynamic perspective.

Going back to the question of selling gold for dollars, asking ‘When should I sell gold based on its dollar price?’ is akin to asking when the mountain is at its largest size—it’s not the correct perspective.

While not entirely dismissing the use of a dollar level to time an exit, recognizing big psychological dollar levels (e.g. $2000 gold) as self-fulfilling support/resistance levels, the exclusive focus on a specific dollar level is limiting and incorrect in the long run.

Instead, consider gold as the ultimate ‘cash,’ a reserve in turbulent financial markets—a sanctuary for savers amidst economic uncertainties. True money.

Adopting this perspective prompts a shift in evaluating ownership in any asset– whether a bond, stock, real estate, or other, the crucial question becomes whether the principal growth and yield, measured in ounces of gold, have been positive.

The ability to confidently answer this question reflects the soundness of the investment as an alternative to holding wealth in gold.

Therefore, understanding when to ‘sell’ gold becomes intertwined with recognizing an opportunity to acquire something else (another productive asset) with confidence in a proper return relative to risk, rather than a simple dollar price level.

So going back to the common client question on when to exit gold. I recommend only doing so for liquidity needs or when a productive investment opportunity arises.

If possible, engage in self-evaluation and pose questions such as, ‘Will this alternative opportunity, on a risk-adjusted basis, enable me to accumulate more ounces of gold in the long run?'”

Thinking this way shifts the focus from fixating on an ideal dollar exit point to a mindset centered on a total number of ounces.

This not only aligns with the core principles of genuine wealth preservation but also empowers individuals to make judicious decisions within the dynamic ebb and flow of global markets. Underscoring the lasting significance of gold as true money—the steadfast financial sanctuary during times of uncertainty.