When Should You Buy Gold? What You Need To Know

They call it the gold standard for a reason. Gold has intrinsic value, cultural prestige, scientific utility, and long-term stability. While there is never really a wrong time to buy gold, some moments are better than others.

In this post, Oxford Gold Group covers everything you need to know about the timing of making gold investments, including the answer to the common question, “When should you buy gold?”

When Should You Consider Buying Gold?

Knowing the optimal times to buy gold can help you make the most of your investments. Strategic gold purchasing takes the following factors into account:

Market Uncertainty

Gold is a generally stable asset that maintains its value over the long haul. While the spot price fluctuates depending on market pressures, the precious metal has been valuable since ancient times. That means people have historically turned to gold bars and coins for peace of mind during periods of geopolitical, economic, and natural instability.

For example, during the COVID-19 pandemic, the price of gold reached an all-time high on August 7, 2020 (at $2,067 per troy ounce). On the other hand, during stretches of relative peace and stability, gold prices often cool as investors regain their faith in more volatile investments like stocks and bonds.

Inflation Concerns

leather wallet with red upward arrow

In the years since the pandemic, inflation has become the primary concern of many Americans. In December 2023, inflation increased by 3.4% from the year before. For many investors, this makes it one of the best moments to invest in gold. Unlike paper currency, gold retains its purchasing power during periods of high inflation and, sometimes, even goes up.

That’s because gold is a limited physical asset with intrinsic value. Since it is not directly linked to the economy, it offers a financial buffer as the prices of goods and services soar. During periods of abnormally high inflation — such as the late 1970s and early 1980s, and again in 2022 and 2023 — the price of gold has reached record or near-record highs.

Currency Depreciation

Currency depreciation occurs when the foreign exchange value of one currency (like the US dollar) falls in comparison to other currencies (like the Euro or the Yen). Depreciation often accompanies market uncertainty (like political instability and financial crises) but can also come from interest rate differentials (the difference in interest rates between two securities).

As a currency’s value drops, foreign investors may pull out of a market, which causes the currency — and stock indexes — to drop further. Unlike other asset classes, gold retains its value regardless of currency devaluation.

Diversification Strategy

One of the strongest benefits of gold investments is the ability to diversify your portfolio. As we’ve seen here, gold retains its value and purchasing power despite macro trends, currency devaluation, and high inflation.

For this reason, gold prices have historically had an inverse correlation with paper markets. This means gold prices rise as the value of other assets drops. When your stocks and bonds don’t perform as you’d hoped, you may look into market opportunities for buying gold.

Long-Term Wealth Preservation

Because the value of gold fluctuates less than many other investments, it is a safe and reliable choice for long-term wealth preservation. You aren’t likely to make short-term gains trading gold, but adding it to your portfolio can help you prepare for retirement and pass down generational wealth to your children and grandchildren.

How Do Interest Rates Impact the Timing of Buying Gold?

white cube with interest logo on top of calculator

When asking, “When should you buy gold?” you’ll also want to consider the role of interest rates. Just like during times of high inflation, market volatility, and currency devaluation, gold serves as a safe-haven asset in periods of high interest rates.

As inflation soars, governments typically lower interest rates to encourage spending. This often causes assets tied to the economy — like stocks, futures, and cash — to decrease in value. However, because the price of gold can rise even as interest rates fall, the precious metal is less vulnerable to economic forces.

Note, however, that this isn’t always a 1:1 relationship. If higher interest rates occur during periods of economic uncertainty or political instability, investor panic can drive gold prices up.

How Does Technical Analysis Help in Determining the Right Time To Buy Gold?

As you plan your gold acquisition timing strategies, technical analysis can help you spot trends and identify the best time to buy or sell. Technical indicators you may use include the following:

  • Gold price movements
  • Historical volume charts
  • Interest rates
  • Momentum indicators, like the Relative Strength Index (RSI) and the Moving Average Convergence/Divergence (MACD) indicator.
  • Futures market positioning

Key Factors To Consider When Deciding To Buy Gold

When evaluating whether to buy gold, ask yourself the following:

  • Do I want to diversify my portfolio? If you already hold paper investments, gold may offer much-needed balance in your portfolio.
  • Am I looking for short-term gains? If so, gold probably isn’t for you. However, gold makes a great choice if you want to build or keep wealth over the long run.
  • Do I need a passive income? Gold doesn’t produce income, so if you want to make money passively, consider other types of investments.
  • Can I afford to pay for storage and insurance? When evaluating pros and cons, don’t forget to include storage and insurance costs in your calculations.
  • Can I be patient? To maximize your gold investment, you’ll want to take the long-term view so you can buy and sell when it best suits you.

What Are the Potential Risks of Buying Gold?

man stop falling wooden blocks

Gold typically makes a reliable, dependable long-term investment. However, it is not without its drawbacks, including the following:

Price Volatility

While gold is historically more stable than many other asset classes, its prices fluctuate over time. Gold prices may not drop during high inflation or economic downturns, but they may change alongside factors like mining production and increased industrial usage.

Lack of Income Generation

Precious metal investments like gold and silver do not generate any income as you hold them. This puts them at a distinct disadvantage compared to traditional equity assets like stocks, bonds, and mutual funds that produce yield. In other words, you won’t receive any passive income from owning gold. You can only make a profit if you sell it at a higher price than when you bought it.

Storage and Insurance Costs

As a physical asset, gold is heavy and bulky. Unlike your mutual fund, you must have somewhere to store your precious metal investments. While you can keep gold at home, doing so requires space and risks theft. In some cases, it is illegal. For example, if you have a gold IRA, the law requires you to place it in an IRS-approved depository facility. When you store gold for long periods with third-party custodians, annual service costs and insurance premiums can cut into your profits.

Common Mistakes To Avoid When Buying Gold

When looking for the safest way to buy gold, avoiding these common mistakes can help protect yourself and your investment.

  • Not buying from a reputable dealer: With so many gold retailers available, make sure to choose one that is reputable, patient, and knowledgeable.
  • Not checking purity and authenticity: Familiarize yourself with ways to determine gold quality, including mint marks and stamps, in-person examinations (like magnet and water tests), and certificates of authenticity.
  • Not understanding the gold market: Conduct your own research to recognize a good deal and get a fair price.
  • Investing only in gold: While gold is a powerful diversifier, it’s best as part of a balanced investment portfolio.

Gold Investments With Oxford Gold Group

So, when should you buy gold? There is no one right answer, but hopefully, we’ve given you some tools to make your decision easier. When you decide the time is right, contact Oxford Gold Group at 833-600-GOLD to learn about our gold investment options.

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