When is The Right Time to Start Investing in Gold
When is the right time to invest in gold?
The idea of buying gold is a fascination for many, but some may be put off due to a lack of confidence surrounding the right time to invest. Beginning a gold investment journey requires careful consideration of a number of factors pertaining to the individual. Additionally, in order to ensure maximum comfort with any decision made, the would-be investor would do well to perform certain research in the lead-up to, and at the moment of investing. With that said, we are going to explore the dynamics influencing a decision around the right time to invest.
Reasons to invest in gold
Perhaps the most prudent place to begin, is to reflect on financial goals and current portfolio; generally speaking, experts suggest that a 5 – 10% allocation should be invested in precious metals, but this will depend on an investor’s individual risk profile. Consider your investment horizon: Are you likely to need to liquidate gold assets in the near future? Do you plan to keep hold of precious metal assets long-term? If the former, then it would be advisable to invest in gold at a time when you believe the price is likely to rise, so that you can sell back your purchase for profit in the near-term. If the latter, your purchase price sensitivity is reduced, as the longer you store your gold, the more the price is likely to increase from the purchase price. Notably, the gold price tends to move independently of other financial investments such as stocks and shares, which means gold can act as security against losses elsewhere in your portfolio.
Watch the gold price
Any would-be investor should be keeping an eye on the gold price, which fluctuates daily. Seeking to understand the macro-economic factors which affect the gold price can go some way to aiding the gold price forecast. According to the World Gold Council, gold has tended to perform well generally during January and the late summer months. If you are unsure where to follow prices, many bullion dealers will include live prices and charting on their website. Alternatively a myriad of apps exist which allow you to track the live price at the click of a button. The obvious assumption may be that the best time to invest is when the gold price is low, however, it is also important to consider when it is likely to rise. Although no one has a crystal ball to foresee this, there are certain indicators such as the health of the economy, what is happening in the stock market, and what geopolitical challenges are unfolding, or on the horizon, that may trigger an impending rise or fall of the gold price.
A safe haven asset
Typically speaking, gold tends to perform well during times of economic uncertainty, such as high inflation and recessionary periods. Gold has delivered positive returns in five out of the last seven recessions, earning it a reputation as a safe haven asset. Therefore, if you are looking to invest for short-term gain during one of these periods, it would be advisable to buy only if the price looks as though it will continue to rise, otherwise there is a risk of buying during the peak with the price then dropping off, and needing to bide time for the price to rise again. In addition to being a safe haven asset, gold can also be a tax-efficient way to pass on wealth from one generation to another.
Speak to an expert
A dual consideration not to be overlooked in your gold investment journey is knowing where you want to purchase your gold from, and how and when you want to exit the investment. A good precious metals dealer should be able to offer you expert advice on product options, tax, costs, storage and market trends, without pressure to buy. They should also be able to give you an indication of what you can sell the items for. If buying gold bullion online you would certainly want to ensure delivery is fully insured, and that the retailer has a physical location as well as an online presence. Equally, if deciding to store metal at a secure location, you should perform due diligence to ensure that your holdings will be fully insured with adequate protection. You can check with your chosen selling or vaulting partner who will be able to provide details.
It may seem like obvious advice, but the best time to invest in gold, is when you are ready and have the capital available to do so. If you stay cognisant of global macro environmental factors affecting the gold price, align your buying time to your financial goals, and perform due diligence around where to invest, you will be well-positioned to secure your gold investment at the right time, at the right place and at the right price.
