$1500 Gold and $45 Silver! The Difference Between Just Making A Prediction and Profiting From It

"$1500 Gold and $45 Silver!" was the title of an email that a friend of mine sent me a couple of days ago. His email reminded me that he had predicted these prices last year.

So, I wrote him back and said:

Hopefully you were able to profit from your prediction - and have a plan for when to take profits.

Those two things separate an economist from a trader :-)

Well, it turned out that he had taken profits along the way, and saved them to reinvest in pullbacks. I told him that he could also have used my stock trading riches system. It would actually work for more than just stocks, ETFs, or mutual funds. You could use it to trade actual metals, commodities, or currencies. In fact, just about any good.

As an example, you could take $10,000 and buy $7,000 worth of gold (or silver, or oil, or tea) and keep $3,000 in a cash reserve. Once a year, if the value of the commodity has fluctuated by at least 10%, you could rebalance. Of course, the total amount, constant value, and reserve amount can be anything you want.

With a commodity, instead of strictly rebalancing, you may want to use the optional growth rule from my book. This way, the constant value would grow over time as your position went up.