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Personal Finance Gold

Is It a Good Time to Buy Gold?

Should I buy gold? It’s a question many savvy investors ask themselves. Gold will help diversify a portfolio, and this precious metal has long been used as a hedge against inflation. However, buying a physical asset like gold differs from purchasing paper assets such as stocks or bonds.

Many also wonder when is a good time to buy gold. Does it matter if you purchase now, or do you need to wait until gold hits a specific price or certain economic conditions are present?

The answer isn’t always clear-cut, but keep reading to learn more about deciding when to purchase gold and how to do it.  

Should I buy gold now?

Gold prices hit a record high in December 2023, and while they came down in early 2024, it didn’t take long for them to start climbing again. When this happens, it may seem like the wrong time to buy gold, but it could be a mistake to try to wait until prices fall. The precious metal is poised to have its best year in 2024 since 2020.

The price of gold is fueled by various factors, including supply and demand, inflation, interest rates, and the dollar’s strength. Plus, international conflicts and political events can impact gold prices.  

Economic and global conditions are constantly changing, and as of this writing—in March 2024—it’s a mixed bag for the metrics that could indicate whether gold prices will increase or fall this year.

Here’s what you should consider.

Seasonal gold prices

Historically, gold prices have followed a seasonal pattern of rising and falling. Physical Gold Ltd., a London-based bullion dealer, says that the best times to buy gold have traditionally been at the start of the calendar year and mid-summer.

There is also something known as the “autumnal effect,” which researchers outlined in a 2013 study. It found that, between 1980 and 2010, September and November were the months where gold had a positive and statistically significant change in price. That may mean you’ll pay more if you wait and buy during those months.

Inflation and interest rates

High interest rates tend to mean a stronger dollar and lower gold prices. However, with interest rates expected to fall in 2024, that could mean that gold prices will rise in the coming months.

That may be tempered, though, by a falling inflation rate. Gold prices typically do well in times of high inflation. That may explain why the value of gold has soared in recent years. 

However, if inflation drops this year, demand for gold may decline. But that may not be enough to offset the expected price boost from falling interest rates.

Current economic and political conditions

Gold prices often have an inverse relationship with the stock market. In other words, when the value of one goes up, the other goes down. However, when the value of both rallies, don’t expect the current strong stock market to lower the price of gold for you.

International conflicts also tend to raise gold prices since many people value the precious metal as a haven during times of uncertainty. In particular, the Israeli war with Hamas is said to have helped fuel the record gold prices at the end of 2023.

Buy gold before prices rise

While the indicators above are mixed, the bottom line may be that now—April 2024—is the time to buy gold. Multiple industry experts say gold could have a record year, so you’ll want to purchase your precious metals before prices soar.

Even if you wait until summer, when prices historically dip, you might find gold is more expensive then as compared to now. And you definitely don’t want to wait until November. 

Not only are prices traditionally higher then, but a U.S. presidential election is occurring in 2024. Any uncertainty caused by the results of that election could make gold significantly more valuable.

If …Buy gold now?
It’s mid-summer
Interest rates are high
Political or economic uncertainty is in the future
It’s September or November
Inflation is falling
The stock market is falling
You need to diversify your portfolio🤔
You don’t already have an inflation hedge 🤔
You have the funds available to invest🤔

Is this a good time to buy gold? How to know

When deciding whether to buy gold, you’ll want to consider the following:

  • Inflation: Is it rising or declining?
  • Interest rates: Are they expected to increase or decline?
  • Stock market: Are we in a bear or bull market?
  • Politics: Is there unrest in the world or uncertainty closer to home?

There is no crystal ball to know precisely how gold prices will change over time, but historically, prices have been lower—meaning a good time to buy—when there are higher interest rates, higher inflation, a strong stock market, and relative peace in the world. That’s because demand for gold often drops at these times.

But rather than trying to time your gold purchase perfectly, it may be better to engage in what is known as dollar-cost averaging. This strategy is often used with paper investments and involves regular yearly purchases.

For example:

  • You plan to buy $12,000 worth of gold this year. 
  • Instead of buying that amount, purchase $1,000 worth of gold each month. 
  • With this approach, you may buy gold at higher and lower prices throughout the year, but it eliminates the possibility of buying all your gold when prices are highest.

One caution though: some dealers might offer a discount for larger purchases so check to see if that is an option. If so, the discount might negate the benefits of dollar-cost averaging, and buying a large amount of gold at one time could be better.

Resources for gold price research

Before you buy gold, it’s wise to do your research on historical prices and future forecasts for the commodity. Here are some places to check for information:

  • World Gold Council: Dubbed the “global experts on gold,” the World Gold Council researches the international gold market and offers information to professional and individual investors.
  • S&P Global Market Intelligence: The analysts at S&P Global Market Intelligence have put together a commodity briefing report for gold. It is available for download although you will have to provide a business or institutional email address to access it.
  • J.P. Morgan Global Research: Financial firm J.P. Morgan conducts analyses on various markets and investments, including gold, and many of their findings are available to the public.

Risks of buying gold

No investment is risk-free, and that includes gold. Before you purchase precious metals, understand how gold pricing works and the costs involved.

  • Volatility: Since many factors can influence the price of gold, its value can be prone to significant upward and downward swings. Its value generally bounces back after a drop, but the price fluctuations can be hard for some people to stomach.
  • Lack of yield: You won’t get dividends or interest from a physical gold investment.
  • Storage costs and risk: There are additional costs with physical gold that you won’t have with paper investments. If you hold your precious metals in an IRA, you must pay for storage in an IRS-approved depository. If you keep your gold at home, you’ll want to invest in a safe and be sure you have adequate insurance coverage. There is also the risk of theft if you keep gold in your house.

Many people who own gold do so because it is a tangible asset expected to continue to hold its value regardless of inflation and the value of a local currency. It typically does not appreciate in the same way as stocks.

Gold can be a valuable part of a diversified portfolio, but putting all your money in a single asset is never a good idea. Gold should complement the other investments in your portfolio, not replace them all.

How to invest in gold

When discussing investing in gold, many people assume that purchasing physical gold is the only option. But there are several ways to invest in gold, each with its own pros and cons.

Physical gold

Gold bullion may be purchased as coins, rounds, or bars. Investment-quality gold is typically 99.5% pure. Many people like the security of owning physical gold, although it can present some storage costs and risks.

  • Available in a variety of sizes and styles to fit personal preferences.
  • Asset with a value that isn’t tied to any country’s currency.
  • Consumers should look for reputable gold dealers and be cautious about scams.
  • Gold must be stored securely, which could mean ongoing storage and insurance costs.

Gold ETFs

An ETF is an exchange-traded fund. With a gold ETF, an investor doesn’t own physical gold themselves but rather has a share in a company that owns physical gold. This investment option eliminates some risk involved in purchasing and storing gold.

  • Easily purchased and sold through brokerage firms in the same way as stocks and mutual funds.
  • No storage fees or risk of theft.
  • Doesn’t provide owners with a tangible asset.
  • If the ETF company defaults, there is a risk of losing some or all of your investment.

Gold mining stocks and ETFs

You can also buy stocks or ETFs for gold mining companies. Unlike gold ETFs, which invest in gold itself, these funds include shares in companies involved in gold mining and exploration. So their value isn’t tied to the value of gold, but in theory, as demand for gold increases, the value of the companies supplying gold should increase, too.

  • Easily purchased and sold through brokerage firms in the same way as stocks and mutual funds.
  • No storage fees or risk of theft.
  • Doesn’t provide owners with a tangible asset.
  • The value of investment depends on the strength of the companies rather than the price of gold.

Each option has pros and cons, and your choice depends on your preferences, risk tolerance, and financial goals. Sometimes, investors may decide that combining the above options is right for them. Talk to a financial professional familiar with gold for personalized advice.