Jasmine Birtles
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Should I Buy Gold When Prices Are High?
Ruby Layram
1st Oct 2024
Gold has long been considered a safe haven for your money. It seems like every time the economy is having a bit of a wobble, Gold manages to stand its ground and continue to provide investors with returns.
But what happens when the price of gold is soaring? Should you jump in now, or is it better to hold off until prices have dropped a bit?
If you’ve been wondering whether it’s wise to buy gold while prices are high, you’re in the right place! In this guide, we will explore why gold is so coveted, why the price keeps going up, and whether it’s still a good investment when prices are high.
- Gold’s recent all-time high
- Why did the price of Gold go up?
- Should I buy Gold while the price is high?
Gold Recently Reached a New All-Time High
In case you didn’t already know, Gold recently hit a new all-time high on the 26th of September. This was mainly due to geopolitical uncertainties and interest rate cuts in the US.
When it reached its new high, Gold cost $2,685.42 per ounce. Now, the precious metal is trading at around $2,647.70. It has dropped slightly, but not enough for it to be considered ‘low priced’.
Gold hitting a new all-time high can feel like a double-edged sword. On one hand, it’s a sign that gold remains a solid, trustworthy investment. On the other hand, you might worry that you’ve missed the boat. After all, isn’t the rule of investing to buy low and sell high?
In this article, we hope to clarify why this isn’t necessarily the case when it comes to Gold.
Why the Price of Gold Went Up
Before we get into why it’s still a good idea to buy Gold, let’s dive into why the price has gone up recently.
Gold’s price doesn’t just rise out of nowhere. There are several key factors driving the current surge, and understanding these can help you decide if investing now is the right choice.
Geopolitical Uncertainty
One of the biggest factors in the price of Gold is ongoing geopolitical uncertainties. When the world feels shaky, investors want to put their money in something that feels reliable.
Gold has a long history of being that ‘safe-haven’ during shaky times. So, whenever there’s an unpredictable political or economic situation on the horizon, gold tends to get a boost as investors flock to safety.
Upcoming Interest Rate Cuts
Jerome Powell, Federal Reserve Chair in the US, recently announced that interest rates in the States are very possible – as long as inflation keeps dropping as expected.
Rumours of central banks cutting interest rates also tend to push gold prices upward. Low interest rates make the opportunity cost of holding gold (which doesn’t earn interest or pay dividends) much lower. When interest rates drop, holding onto cash or bonds becomes less attractive, so more investors move their money into gold, which maintains its value even though it doesn’t pay a yield.
A Weak Dollar
When the dollar weakens, gold typically strengthens. This is because investors rush to put their wealth into an asset that will maintain its value over time.
Lately, the dollar has been under some pressure due to a mix of economic uncertainty and potential interest rate cuts – all of which have caused a spike in demand for gold.
Central Bank Buying
Interestingly, one of the biggest buyers of gold in recent years has been central banks themselves. Countries like China and Russia have been stockpiling gold as a way to reduce dependence on the U.S. dollar and do a bit of diversification.
This means that demand is consistently high from very powerful buyers.
Should I Buy Gold While the Price is High?
Buying an asset when prices are at an all-time high seems to go against what everyone thinks about investing! But, here are a few reasons why now is still a good time (as ever!) to invest in Gold.
Gold is an Inflation Hedge
Gold is perhaps the most well-known inflation hedge. This means that it protects the purchasing power of your money when inflation rises.
When prices of goods and services go up, the value of paper money tends to dip (you can’t buy as much with your money), but gold tends to hold its ground.
Therefore, it is used as a store of value to protect wealth over time -making it appealing to long-term investors. Even when prices are high, there is a chance that they will be even higher in the future!
Gold Has Relatively Low Volatility
Despite hitting an all-time high, gold is often seen as less volatile compared to assets like stocks or cryptocurrencies.
Gold’s price movements are typically more stable, making it an attractive option for risk-averse investors. While it may not offer the same impressive growth potential as some stocks, it also doesn’t tend to drop as dramatically when the market takes a hit.
Investing in gold is a good way to diversify your portfolio with a less-rs=isky asset.
Gold Holds Its Value Over Time
While the value of currencies, stocks, and bonds can fluctuate wildly, gold has proven to hold its value over time. Despite the occasional rise and dip, gold has never become worthless.
In fact, it has been able to retain its purchasing power over centuries. They used Gold way back in 600 BCE in Asia and it has been accepted as a store of value ever since.
What is the Best Way to Buy Gold While Prices Are High?
If you’ve decided that buying gold still makes sense for you despite the high price, the next step is to decide how to buy it.
There are several ways to invest in gold, and choosing the right option depends on your goals and how involved you want to be in the investment.
Gold ETFs
Exchange-traded funds are one of the easiest ways to invest in gold without actually having to store it yourself. Gold ETFs track the price of gold, and you can buy and sell them just like stocks.
They are a cost-effective way to gain exposure to gold. If you don’t want the hassle of storing physical gold but still want to benefit from gold’s price movements, ETFs can be a great option.
Physical Gold Bars
If you fancy something a bit more traditional, nothing beats holding a gold bar in your hands!
The beauty of owning physical gold bars is that they’re yours, and they’re not just numbers on a screen. Once you own your gold, you can do with it as you please.
However, buying physical gold requires proper storage, insurance, and sometimes higher transaction costs. It’s best suited for those who are looking to hold gold as a long-term investment and don’t mind the responsibility of looking after it.
Even though it recently hit an all-time high, Gold is still an excellent investment for 2024. If you would like to start building your Gold portfolio, we have an excellent guide on how to invest in Gold for beginners.
Are you interested in learning more about investing? Why not sign up to the MoneyMagpie bi-weekly Investing Newsletter? It’s free and you can unsubscribe at any time if you find it isn’t for you.
Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence. When investing your capital is at risk.
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