Most investors react only after an event has passed. How many people actually invested when markets had crashed? Anyone who would have invested when markets had crashed would have today easily made over 100-150%. As I have always said a Crash is the best to make Cash. Whether life or investing, to succeed you need to strike only when the iron is hot. It doesn’t make sense to invest when the masses are rushing behind something.

Once again the same thing is going to happen with most people. They are going to miss an excellent opportunity. Gold is going to see a massive rally and it is going to surprise most people all over the world. In the past two decades, Gold hasn’t rewarded anybody in real terms. In fact even investors like Warren Buffett have regularly criticised gold. This has caused most people over time to ignore gold. But to create wealth you don’t need to follow the massed, but need to do things that others don’t.

Gold is one of the most complicated assets to analyze. There are no balance sheets or cash flow statements and no PE ratios to look at. To understand Gold you need to be aware of international politics, the situation of the world economy, mining supply, and existing reserves across the world, global currency movements, and even know which country or economy is headed for bankruptcy.

One article wouldn’t do justice to analyzing gold. However one of the main reasons gold prices are likely to double or even triple in the coming months is because major international financial institutions are in trouble and the world gold reserves mentioned by them are exaggerated. The world has much less gold than stated by statistics and once more people come to know about this, they will rush to buy gold. During any crisis gold becomes a universally accepted asset and the way the global economy is headed, I am certain most people would want to protect themselves and their wealth.

Another major factor is that most international currencies today are extremely unstable. Imagine what can happen to a nation’s currency if every other day large automobile companies, banks and financial institutions go bankrupt. How long can people trust it?

I know at this moment most people will be sceptical of what I am saying, especially after the IMF’s approval of selling gold. Please remember that international finance is not as clear as it appears. There are several things happening behind closed walls that very few people know about. A couple of months ago very few people would have dared to question a Lehman Brothers or Bear Stearns. Today we know what happened to all those who might have followed them.

In the world of investing, it is quite possible that an individual investor like you is several times more successful than a bunch of PHDs working with a large fund. At the end of the day nobody can value your hard earned money more than you. While you invest for yourself, large funds are handling others money. Never blindly follow them.

It is my humble request to ask yourself the following questions before taking a decision of looking at Gold as an investment.

1. During the Second World War what asset helped Jews preserve wealth while escaping from Germany?

2. During the India-Pakistan partition what was the only asset Indian refugees were able to bring to India?

3. What will happen in the world if a major American bank collapses?

4. Is there an uncertainty regarding where currencies are heading?

5. Are the reserves of Gold in America actually owned by America, or are they just acting as custodians for other owners?

Once you find answers to these questions, you will have a much better understanding of Gold. Of course time is the best judge – let us wait for six to nine months and see whether I am right in buying Gold or is the IMF right in selling it.

Keep smiling and keep learning!

- Yogesh Chabria