Gold Hits $758, I’m Up 403%

October 17th, 2007

Earlier this year (in May) I wrote an article titled: So You Think Gold Will Hit $1,000? It hasn’t been a year since that article (actually its only been five months) and gold is sitting around $758 US per ounce. In the article I stated that I didn’t know whether or not it would hit $1,000 US within 12 months, but I did say I thought it would continue to go up. I even put some money where my mouth was…

The Forex Gold Strategy

I first began using this unique strategy during the first few months of 2007. I can’t remember exactly when, but I did screw it up a few times first and lost a couple of dollars (not much). I originally created this investing strategy to invest in silver on leverage. I quickly adapted it to invest in gold as well. The leverage part is what makes this strategy so risky.

Please Note: This is a very risky strategy that I only used with a very small amount of money, expecting I could lose it all. If you want to see a very close version of the investing strategy I’m talking about, go here. I published a version of the strategy on that forum.

My Investing Steps @ The Time:

Using a forex broker named Oanda, I bought gold on leverage (XAU/USD). At the time I had about $100-150 USD in the brokerage account. I bought 1 ounce of gold when it was priced at $612.20 an ounce. I bought another 2 ounces a few days after that at $627.70. With just$100-150 USD, I was in control of about 3 ounces of gold. I’m not taking interest into account at the moment but I did pay interest and I may have had closer to $150 at the time as the cash amount is currently JUST above $100. I really do have to go back into the history and see to be sure of the details, but they are close enough for the purposes of this article.

I then walked away and forgot I made this investment.

Just two days ago I remembered I made this investment and went online to check how it did.

The Investing Results

The price of gold is now at ~$758. My Unrealized Profit is 403% and the account value is now $506.39. Not bad!

Woulda/Coulda/Shoulda

Now lets play devils advocate for a second and pretend I invested a lot more money (say $10,000 USD) at that time. Lets pretend for each $100 USD I had sitting there I bought 1 ounce of gold. That would have left me some breathing room in case the price fluctuates greatly. Remember, I’m investing on leverage and don’t want to get stopped out too soon so I HAVE to leave some funds in the account to weather the fluctuations.

That would mean I would have purchased 100 ounces at $627.70. Today at a price of $758, I would have made$130.30 for each ounce, or $13,030. Not a bad gain, and that is using a more conservative investment style than I actually did.

In reality, I purchased 3 ounces of gold for the $100-150 USD I had. If you do the math on $10,000 account whereby I purchased 3 gold ounces for each $100 USD, I think you will see I could have made a years salary (for most people) in the last five months by investing only $10,000. These are incredible gains, the kind of gains that make ordinary people fortunes… but the risk can also leave you standing there with NOTHING.

You Can Make a Fortune Investing Risky… But You Can Lose Every Penny Just as Quick

The downside is its very risky, and that is why I didn’t put more money in. I don’t have a lot of money to work with as I’m just starting my portfolio and Forex isn’t my main priority (forex is a very risky way of investing). It was a learning experience and a test. Nothing more. I have learned some things from it and glad I conducted the experiment. But by no means do I think I can easily reproduce those results with larger sums of money… It is possible to reproduce… but not easy and not for the faint of heart.  Risking $100 is a lot different than risking $10,000 for me at the moment!

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