Why I Hope Gold Falls

"I hope gold falls to $1000 an ounce," writes one Gold Mining stock analyst...

AS A SELF-PROFESSED gold bug, why would I possibly want my favorite investment to fall in value? asks Jeff Clark, senior editor of Doug Casey's Gold & Resource Report.

Have the long hours finally caught up with me? Au contraire; my near-constant devotion to all things gold has only served to crystallize one of the things I really want out of this.

Here's a hint...

I had lunch with a reader at a conference recently, and while talking about one of my favorite subjects – Gold Mining stocks – I asked why he was invested so heavily in them.

"Greed," he said bluntly and with little hesitation. I appreciated the honesty.

Let's be frank: I'm here to make money, and so are you. And that's why I hope gold falls to $1000 again.

Let's say Bob has taken our advice and has been storing cash. I'll use $1000 as an example. If Bob buys Yamana Gold now, he'd get about 93 shares as I write (at $10.73 per share).

Now, let's say gold drops to $1000...about a 10% fall from here, and due to its leverage, AUY sells off by a 2-to-1 margin, meaning 20%. So with that same $1000, Frank, who's waited for the downturn, buys 116 shares at around $8.58. Thus, instead of owning 93 shares at $10.73, he owns 116 shares at $8.58.

When Frank sells, he doesn't just make the difference between $8.58 and $10.73 (an extra 25%), he also makes 125% on the extra 23 shares he owns if Yamana doubles in a couple years, which I expect it to. So two years from now, Bob would have $2000, but Frank would have $2500 because he bought more shares and at a lower price.

Frank makes 25% more than Bob on the same Dollar investment simply by buying when gold and Gold Mining stocks fall in price.

Got $5000 saved up? Multiply the profit by five. And with larger amounts, you can see we're talking serious money.

I don't know if we'll see $1000 gold again or not, or if Yamana will fall that low, but I would point out that corrections in the Gold Price can range as high as 20% (2008 notwithstanding), so a further sell-off in price would not be out of the ordinary. A 20% correction from gold's peak at $1,212.50 on December 2 would equal $970. That's not necessarily a prediction, but it shows you that price is certainly possible.

Don't like my wish? Remember, it's called a bull market for a reason; it's not a cow market or a puppy market. It's going to try and buck you off. But a correction to $1000 or even lower can give you the chance to buy more, cheaper. Don't view sell-offs as a bad thing but rather as an opportunity.

Bring on $1000 gold!

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