Best Time To Invest In Gold

Best Time To Invest In Gold

Disclaimer: Many or all of the companies listed here may provide compensation to us. This is how we maintain our free service for consumers. Compensation, along with hours of in-depth editorial research, determines where & how companies appear below.


Gold has always been a good asset for every balanced investment portfolio. However, investing in gold is even better during certain times than others. 

Right now and the foreseeable future is one of those times where it is very good to invest in gold. According to experts, the following are all of the best times to invest in gold. You will see that many of these things match what is going on in our world today.

Learn Why Now Is A Better Time Than Ever To Invest In Gold!

Best Time To Invest In Gold

During Currency Fluctuations

Most countries have floating exchange rates, which make currency fluctuations just a normal part of the economic landscape. Ideally, a currency's value is based on supply and demand. If there's a high demand and a low supply of your country's currency, then its currency's value will skyrocket.

A strong dollar allows you to affordably travel to foreign countries that have weaker currencies. However, business owners who rely on foreign markets to sell their wares soon learn the downsides of a strong currency. Their goods become too expensive in markets that have weaker currencies, and competitors in those foreign markets eventually overtake and destroy their overseas ventures.

Currency manipulation is so common that many countries accuse their economic rivals of purposely devaluing their currencies to keep their imported goods on foreign shelves. While these economic policies benefit one group, it can cause serious losses for improperly balanced investment portfolios.

If your investment portfolio is at risk from market-driven or politically influenced currency fluctuations, you need a hedge to do effective risk management. A hedge is a tool that helps you to offset losses that your investment portfolio can experience when currencies dive.

Historically, investors use gold as a hedge against falling currency values. In the United States, investors note that gold consistently rises when the dollar goes down.

Best Time To Invest In Gold

When You Need a Hedge Against Inflation

Inflation happens when a currency's purchasing power declines over time. It's more permanent than a mere currency fluctuation and has more widespread effects. When inflation occurs, prices rise on all types of goods and services.

If you're not a large-scale manufacturer that can pass on high prices for goods to consumers, high rates of inflation are bad news. Markets experience inflation when the costs of items such as wages and raw materials go up.

Inflation also happens when there is an increase in demand and a constrained supply of certain products. If the products are essential items such as food or building supplies, you'll see inflation on these goods as consumers resign to pay top dollar for them.

In most cases, poor economic policies are the root causes of inflation. During the global pandemic, businesses temporarily shut their doors and furloughed all but their most essential workers. The government gave the furloughed workers unemployment benefits that exceeded most of their regular wages. When the businesses reopened and called back their workforce, many workers decided to stay home and keep collecting their unemployment benefits for health concerns of course.

Desperate businesses offered iPhones, one-time cash awards, and increased wages to lure would-be employees back to work. Many companies failed to get enough workers to staff their businesses and threw in the towel. The companies that succeeded had to raise their prices to accommodate the sharp and sudden rise in employee wages.

We see this scenario play out across different industries in real time. This means that there is a high risk of widespread inflation in our future.

With good economic policies, the market often corrects itself over time. However, we see examples in history and in recent times where inflation goes from bad to worse.

Who can forget the Weimar Republic hyperinflation event in the 1920s? Venezuela repeats history with its own version of hyperinflation that has continued since 2016. According to Bloomberg the price of a cup of coffee in Caracas rose 87,000% in one year.

The people who survived this catastrophe in Venezuela are those who invested in gold. Besides holding its value in the face of inflation and currency devaluation, gold rose in price by 3.1 million percent in one year in Venezuela.

The Risk Of Inflation Is Higher Than Ever Today. Start Protecting Your Money Now.

Best Time To Invest In Gold

When There's a High Risk of Deflation

When prices of goods and services drop sharply, it's called deflation. It happens when demand drops below supply. While sales prices on everything may appeal to your shopaholic significant other, deflation hurts all of us in the long term.

At first glance, deflation is a portfolio killer. Imagine that you've saved your money in an investment account for decades. Deflation hits, and your real estate, art, and other investment assets are worth much less than the price that you paid for them. While this is an extreme scenario, you get the idea of why deflation can be just as bad or worse than inflation.

Not yet convinced of the dangers of deflation? When a business operates in a deflationary economy, its customers are conditioned to keep looking for lower prices. Most businesses can't stay afloat when they have to constantly cut their prices.

They attempt to hang on as long as possible by taking shortcuts that cheapen their brands and by laying off employees. These tactics nearly guarantee that there will be a sustained low demand for their products. When they finally shutter their doors for good, more workers get added to the unemployment roster.

Deflation starts a vicious cycle that's hard to break. It directly links to falling interest rates. Raising and lowering interest rates are tactics that are used to spur stagnant markets.

In a deflationary economy, central banks can only lower interest rates so much before they reach zero. In severe cases, they can adopt negative interest rates. The premise is that business loans will become more attractive, and companies will use the money to grow the economy.

However, banks make money from the interest on loans. If they can't make a profit from those loans due to negative interest rates, they will reduce the number of loans that they process. This makes lowering interest rates below zero counterproductive.

When deflation leads to civil unrest, gold allows you to buy a way of escape. According to research that Reuters published, the United States has experienced three documented periods of deflation. During each of these times, gold's value rose between 44% and 100%.

Best Time To Invest In Gold

During Political Uncertainty

When we think of things that propel the U.S. economy to greatness, innovations in technology and manufacturing always come to mind. However, bringing new ideas to market takes capital. That capital has traditionally come from private investors.

Investors consider innovative technologies such as artificial intelligence, machine learning, and 3D printed digital inventory to be intangible assets. Most of them consider these assets to be riskier than physical assets, and they shy away from investing in them when there are high levels of political uncertainty in the market.

Investors need a politically stable environment to make sound investment decisions regarding intangible assets.

We see an example of missed opportunity and financial collapse when we examine 1990s Italy. The 1990s was a time of unprecedented growth opportunities in the tech sector that could have sent Italy's economy into superstardom. However, political infighting, secret agendas, and poor policies sent a message to potential investors that Italy wasn't the place to launch their tech startups.

Economic cycles come, go, and return again. While most of Italy's population suffered greatly from the country's economic collapse, some lived to fight another day by investing in gold.

Gold allows investors to store their wealth in an asset that historically weathers economic storms best. When the next big opportunity emerges in a less volatile political climate, you'll be ready to do a proper risk evaluation and score big.

Learn Why Now Is A Better Time Than Ever To Invest In Gold!

Best Time To Invest In Gold

When There's a Decreased Demand for Gold

While many millennials latch onto cryptocurrencies as their chosen way to hedge against the falling dollar, more mature investors remember the fundamentals. Never before in history has America experienced such political instability and social unrest as in recent years.

Seasoned investors agree with the younger crowd that hedging is absolutely needed, but that is where the agreement ends. Investors who have lived through several economic cycles rarely invest in intangible assets during times of political uncertainty. Although a wonderful idea in theory and in practice, Bitcoin, Ethereum, and other non-federal cryptocurrencies are still considered to be intangible assets.

A great time to buy gold is when everyone else is mesmerized by the possibility of getting rich quickly in cryptocurrencies. The demand for gold becomes temporarily eclipsed by the desire to invest in all types of cryptocurrency coins of dubious value.

The demand for gold will skyrocket if today's popular cryptocurrencies get replaced by a federal digital currency that's backed by tangible assets such as gold and silver.

Best Time To Invest In Gold

Before Reports of "Peak Gold" Supply Scarcity

Besides its versatility, scarcity is what makes gold so valuable in the global economy. According to analysts at Goldman Sachs, the production of gold will peak, and the world's sources of mineable gold will dwindle in less than 20 years. While many analysts believe that peak gold reports are myths, there's no denying that less of the precious metal is being introduced into the market by mining companies each year.

While gold becomes more rare, the uses for the metal continue to increase. Gold is malleable, corrosion resistant, and a good conductor of electricity. These are qualities that make it a mainstay material in modern electronics and computing devices.

Small amounts of gold are used in nearly every electrical device on the market including smartphones, laptops, and tablets. People regularly upgrade their phones, and there aren't enough recycling programs to retrieve the gold that's lost when old phones get tossed. According to data that USGS published, 37% of U.S. gold is used in electronics, except for bullion.

U.S. space programs have come into the spotlight recently with the formation of the U.S. Space Force. However, aerospace agencies such as the U.S. Air Force Space and Missile Center and U.S. Air Force Space Command have used gold for decades in the production of launch vehicles and in the computer systems that control them. The advent of the Space Force promises even more demand for gold in the future.

Here are some other organizations that use gold.

  • Medical device manufacturers
  • Dental offices
  • Jewelry makers

Scarcity of supply that's coupled with increasing demand equates to sky-high gold prices in the near future. The best time to buy gold is before supply peaks and society finds more uses for gold.

Best Time To Invest In Gold

When You Need to Diversify Your Investment Portfolio

Every investment involves a level of risk. The amount of risk that you choose to take depends on your investment goals.

Financial advisors encourage younger investors to take on more risk because they will historically gain greater yields over time. Mature investors who need to stash away money for a looming retirement traditionally forego riskier investments. By investing in gold, even the most risk-averse portfolios can tolerate more high-yield investments.

When we include gold in our portfolio, we can safely invest in stocks or foreign currencies that have more earning potential. If they rise, we will have made a great deal of money. If they flounder, our gold will hold the portfolio together.

In many cases, plummeting stock prices are followed closely by rising gold prices. When our portfolios have the right combination of gold and other assets, we lose nothing even during a stock market crash.

Diversify Your Portfolio & Hedge Against Inflation Starting Right Now!

Conclusion

Gold has a long history of being the money of choice for the most advanced civilizations that earth has ever seen. When you think about the criteria that makes an asset a good candidate to be called money, gold hits the high notes.

Gold has these qualities.

  • It's hard to source
  • Easily divisible
  • Durable
  • It's in limited supply.

In 2019, the Basel III agreement that regulates the central banks around the world reclassified gold as a Tier 1 asset. This is an upgrade from its former designation as a Tier 3 asset. Banking regulators believe that gold is a significantly less risky asset than assets in the Tier 3 category.

If the big banks are buying gold as part of their risk management protocols, you can be sure that gold is worth considering for your investment portfolio. Talk to your investment advisor to find out more about investing in gold and other precious metals.

Leave a Reply

Your email address will not be published.