Success in the gold market is all about timing, but maybe not the way you think. Don’t buy gold at any time or any price and hope that you can cash out when prices shift into another record-breaking market. Those are unpredictable and you don’t know when prices are going to peak.
Successful timing has more to do with when you buy and there is no single answer for when the right time is. Your decision should be informed by both broader economic trends and context, as well as your own personal finances and life.
The Personal Side to Gold
The best reasons to buy gold are personal, based on your income, age, risk tolerance, and finances. Gold should be part of every portfolio, though it may not be the first thing you want to invest in. That’s because the metal is primarily about protecting investments you already have. When you bu, you’re hedging your bets. Here are some of the top personal factors that should influence when you buy gold:
- You are no longer in credit card debt. The interest rates on credit card debt are astronomical compared to the returns you can usually get on gold, because it produces no interest. It always makes sense to pay down high-interest debt before you buy gold. Other debts like student loans or mortgages have lower interest rates and longer terms, and as long as you are meeting payments, it makes sense to invest.
- You want to take money out of the stock market. Avoiding volatility and market crashes can put in a vastly stronger retirement position than simply riding out recessions. You can always sell gold again to fund your participation in the recovery, a chance to buy depreciated assets.
- You have already have a large amount of wealth and you want to preserve that money for decades down the road or even future generations. Gold is one of the safest ways to beat inflation long-term.
The Economic Side to Gold
On the economic side, gold prices are complex, but it can be a good idea to follow the central banks when they start increasing their bullion purchases.
There are certain economic trends to watch. These are some of the signs you should look for when you’re finding the right time:
- Stock markets are heading into periods of volatility that scare investors into “wealth preservation” mode.
- You’re concerned about currency debasement due to governments printing excessive amounts of money (to pay off debt and/or stimulate recessionary economies).
- You can get great deals when purchasing gold and silver, whether it’s due to low commodity prices or low premiums from a specific dealer.
- When the U.S. dollar and other haven currencies (like the yen or euro) are down. Right now, the U.S. dollar remains strong, but that’s not necessarily good for the global economy. A strong U.S. dollar put a tight squeeze on emerging economies which have to use the USD for trade, and these are the countries driving global growth right now. If they slow down, the rest of the world will inevitably follow.
There dozens of other factors that can impact gold prices and it’s difficult to make accurate predictions. Your personal reasons for buying gold should take priority over economic reasons, except in extreme circumstances (such as peak prices).
