Gold – Determining the Right Time to Exit: $2k, $5k, $10k?

When clients inquire about selling their gold and ask about specific dollar levels such as $2,000, $5,000, or $10,000, I often respond with a counter-question: "Do you have upcoming liquidity needs?" or "Is there a productive investment opportunity to deploy your capital?"

Naturally, clients may find these responses unsatisfactory, feeling that I haven't directly addressed their primary concern. Particularly when gold hovers around $2,000, they seek guidance on the perfect 'exit' point in dollars—a seemingly elusive goal that promises certainty in decision-making.

In these situations, I challenge clients to shift their perspective on gold. I argue that fixating solely on a USD perspective is the wrong mindset. Gold is not just a speculative tool for market timing; it eliminates counterparty risk and serves as a genuine safe-haven asset. In essence, gold is money.

Charles Vollum from pricedingold.com emphasizes the importance of viewing gold not in terms of dollars but having dollars measured in gold. Gold becomes the standard against which to measure the value of all other assets.

Although it's tempting to perceive gold through the lens of the USD, it's essential to recognize the limitations of this approach. Societal norms may encourage measuring wealth and financial plans in USD, but examining the price chart of any asset or commodity quoted in USD over the last 50 years reveals the impact of systemic inflation, calling into question the dollar's suitability for assessing productivity and growth.

To illustrate, measuring a mountain peak's height through a car window while driving and approaching the mountain can distort the perspective. The apparent size grows not because the mountain is rising, but due to the dynamic perspective.

Returning 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 significant psychological dollar levels (e.g., $2,000 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.

Confidently answering 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, in response to the common client question on when to exit gold, I recommend doing so only 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.