When Should I Buy Gold?

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When is it the Right Time to Invest in Gold?

Gold is widely acknowledged to be a lower risk than many assets, but knowing when to buy gold can maximise the potential of this investment. In reality, the best time to buy depends on the desired outcome of your investment. As with any other asset, if you’re looking to make a relatively quick profit, the you should buy gold when the price is low, with the potential to increase. As with all financial assets, spotting the trend and making an accurate prediction about the movements of the price is key to making a profit. Looking at historical charts , then, and trying to buy as close to the bottom as possible, is usually a good indicator of the best time, or price, at which to buy gold. Someone who bought an ounce of gold in early 2008 will tell you that it was an excellent time to invest in gold bullion. Someone who invested in September 2011, however, may well tell you that it was a bad time to buy gold, as the metal lost around a third of its value over the next two years.

View the gold price throughout history.

However, in truth, investors looking to make a quick return will often look elsewhere and, while it's not impossible to achieve this with gold, most investment in precious metals is of a different nature. One term you will often find associated with gold and silver bullion investment is ‘safe-haven’. A safe-haven is an asset, i.e. a commodity or currency, that is considered to be reliable and low-risk due to its ability to retain a high value when the rest of the economy is facing difficulty. Such assets therefore become very popular in times of economic or political uncertainty, when confidence in banks or other forms of investment is low.

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Buying Gold as a Safe-Haven when Times Are Hard

Gold has always been a popular safe-haven for this exact reason. It is a commodity that has always retained a high value due to its rarity, universal appeal, and its resistance to inflation. It is therefore a very popular purchase for individuals who are looking for a sensible long-term investment they can trust to maintain its value far into the future.

Due to its stable nature, buying allocated gold bullion bars or coins allows an investor to be confident that a part of their wealth is stored in a physical asset that will not disappear in the unfortunate, if unlikely, event of global economic collapse. Their stability in comparison with other investments means that this type of asset becomes very popular as a safe-haven in difficult times.

The fluctuations in the price of gold therefore tend to have a negative correlation with the performance of the wider economy. When interest rates, or share prices, are low, the price of gold will tend to rise. Although this correlation can neither be guaranteed nor accurately predicted, looking at the gold price throughout history does demonstrate a generally inverse relationship with the performance of the economy.

One very powerful example of this is the enormous jump that the value of gold bullion experienced between 2005 and 2011, in which time gold soared to a record high of around £1,164 per troy ounce. This huge rise in the price of gold was very closely linked to the global economic crisis. When the economy fell into recession, causing the closure of several banks and countless businesses, investors ran for the shelter of safe-haven investments such as gold.

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Investing in Gold for the Long Term

However, the majority of investment in gold and other precious metals comes from individuals looking to diversify their portfolio of assets and protect a section of their wealth. With that in mind, there is an argument that, if you’re planning for the long term, there is never really a bad time to buy gold. Again, though, this depends on your goals.

For investors whose primary interest is the long term preservation of their wealth, the peace of mind that comes with investing in bullion is likely to mean that they will be satisfied regardless of the price. Unlike money, gold has an intrinsic value that will most likely never be lost, and can’t be artificially inflated by the printing of more metal. Gold exists in a finite quantity and although mining continues, eventually there will be none left to mine. This means that gold’s real value is actually fairly stable, and it is the value of money which changes throughout time, rather than gold.

The example of an ounce of gold being able to buy the same quality suit now as it could one hundred years ago, despite the price in sterling changing drastically, is often used to illustrate this. Gold provides a level of security that other assets or investments will struggle to match in the long run and that is why it continues to play such a vital role in the portfolios of so many.

Find more information on how to invest in gold.