"I sold my gold," a family member told me a couple weeks ago.
"We probably sold at the bottom," he told me. "But we sold."
He was dejected when he told me this, as if he should have sold closer to the peak in gold. But who knows when the peak is?
I was proud of him. He limited his loss. That is the right thing to do — especially since he is retired.
So far, selling back then looks like a brilliant move. Gold has been in a free fall in recent weeks. It’s down from $1,400 an ounce in early June to $1,275 an ounce today.
These days, when I see the price of gold, I remind myself of this life-changing investing quote from legendary investor Jim Rogers: “Markets often rise higher than you think is possible and fall lower than you can possibly imagine.”
When I first read that in the book Market Wizards more than 20 years ago, I didn’t believe it. I didn’t get it. But since then, it’s proven to be right over and over and over again.
And I always keep that quote in mind.
That’s why I sold gold much earlier than my family member. In my True Wealth Systems letter, we sold our two remaining gold plays on Jan. 2. We were down 2 percent and 7 percent, respectively. I didn’t want to sell, but I had to.
When we sold those two positions in True Wealth Systems, I was dejected like my family member was. Even though I know losing small battles is part of winning the war, I hate it when my readers take a loss from following my advice.
And in my True Wealth letter, we don’t own any gold stocks or funds, or even any gold bullion. (All we have is one semi-rare gold coin.)
We sold our last gold stock in True Wealth months ago; we hit our trailing stop on it. Again, I hated taking a small loss. In hindsight, cutting those losses early is the best thing we could have done.
I personally believe that gold stocks are ridiculously cheap, but I have been patient.
Gold stocks have been in a free fall, but I haven’t tried to catch that falling knife. I hear Rogers’ voice in my head, and I sit on my hands. “Markets often rise higher than you think is possible and fall lower than you can possibly imagine.”
The big lesson today from gold is that Rogers’ advice from 20 years ago was exactly right.
Don’t ever forget it regarding gold or anything else, and don’t ever catch yourself saying "but it can’t fall anymore."
I very much look forward to buying gold and gold stocks again someday, once the carnage is over. But that day isn’t here yet.
— Steve Sjuggerud
This article original appeared on Thursday, June 27, at DailyWealth.com.