Picking a 'target price' for precious metals
Two types of bloggers will argue that there's no need to come up with arbitrary targets
What's your "target price" on the precious metals? How much ink has been spilled by those pontificating on exactly that question. There are two types of bloggers who will tell you there is no need to pick arbitrary targets in this particular bull market:Skip to next paragraph
Joshua has been managing money for high net worth clients, charitable foundations, corporations and retirement plans for more than a decade.
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1. Real Traders
2. True Believers
Only journalists or analysts waste their time coming up with a number and then reverse-engineering a fundamental rationale for something like the gold or silver bull market. It's OK to have a hypothesis (mine on silver is low- to mid-50's before a bludgeoning - purely a guess based on psychology).
But to say "Here's the target because of fundamental factors X,Y and Z" during a phenomenon like this is patently absurd.
Still unconvinced and in search of THE NUMBER? I have two takes on this oh-so-unanswerable enigma of precious metals targets - one from a real trader and one from a true believer, both are equally valid hypotheses and make way more sense than those coming up with "valuations" or "price objectives".
First, the High Chart Patterns blog on looking for a top as sport or skill-sharpening practice:
It’s like picking up dimes in front of a bulldozer. Really. But it is a lot of fun. And for the most part the way we trade is pretty conservative. Once in a while we need to let loose. This is the time for us. It’s also a very good exercise for keeping our skills sharp. Kind of like extreme sport. Timing has been everything, and there’s not much room for error if you want to get the trade right. It’s not forgiving the way a break-out on a trend-day is…
Many traders we know are doing the exact same thing which is kind of funny. And scary.
These guys are looking at an extremely-extended chart and licking their chops...they're going about it in a disciplined way and with tongue firmly planted in cheek at the lunacy of "calling tops". They may nail a short-term blow-off top or possibly THE top. They are not concerned with the growth in silver mine production estimates into 2012 or what the Chinese central bank may do or any of that claptrap. The number is not the point, just the possibility of a trend reversal, however fleeting.
Now let's hear from a True Believer, my friend Get Yourself Connected. He also rejects the notion of price targets for the precious metals but for entirely different reasons than the trend traders...
It was not until this week that I had an idea why many stock players hate the metals but go all starry eyed over a name like LULU. I think it is because the metals are an outside idea that Wall Street (I am using this loosely; I think you know the type) has no control over...
The metals don't need anyone to do their IPO for big bucks (I am leaving out the newer paper ETF's and such; demand created them not a desire to sell them. Subtle but a difference). The metals don't give a shit... Wall Street brought you the Nasdaq bubble and wonderful Mortgage Backed Securities and spread them the world over. The metals just showed up without an invite. I think this is a key point.
I think maybe Wall Street thinks people may know something they don't and that bugs them. No worries guys, it is just an idea. Maybe my type will go bust on this call. Then I buy AAPL.
He ain't selling no matter what. It's more of a structural thing than a thematic investment for him. Sell gold at 1550? 1650? 1738? Not his concern.
For both real traders and true believers, every article or research report with a gold or silver price target is a perfectly childish waste of time. The guessing-game analysts are missing the point entirely.
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