Buying the dips has been a “buzz” word of late. As the stock market goes about its ups and downs, there is money to be made for those that care to pay attention and act. Acting is the operative word in this instance. The issue is, however, we as investors have been taught to buy and hold a stock over time to reap dividends. In the investment world of large established companies, that pay or will resume paying dividends, this is a wise idea. In others, such as commodities, this is not the most proper methodology. For the most part, this is because each commodity hinges on the value of the US dollar, which is in a very real state of flux. This means that an investor needs to pay attention and act if the US dollar appears to be moving in one direction or another.
Perhaps the most “in the news” example of this is gold and oil. As the US dollar rises and falls so do the prices of oil and gold. If one were to pay close attention and “buy and sell the dips” one may make a nice profit. Currently, the value of the US dollar is having issue with US spending patterns, which in turns drives up the price of gold. Generally, the same might be said of oil but, in this case, the overabundance of oil on the market has precluded a rise in the price and value of the product. Because of this, gold and other base metals have become more valuable as a hedge against the declining value of the US dollar.
So the question may be, how does an investor go about investing in light of the declining value of the US dollar. Companies that export product, such as Caterpillar (CAT), require little attention and look comparatively safe. Buying and selling foreign currencies might be one way to go but can lead to exceedingly large losses in only seconds. Next might be bonds and US treasuries.
Buying physical base metal of gold, silver, or copper is the next way to go. In this respect, copper may be an option as it is an indicator of housing recovery and a general up-turn of the economy. If this rout is chosen be careful if the storage option is taken as sometimes companies leverage store to buy more, which exposes their position. Gold is the hot commodity of the moment but rather pricy. In any case, not being afraid to act is the key, whether buying or selling. An investor working in this space needs to pay attention and not be afraid to make the move when an opportunity presents itself.
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