If the dollar’s inflating value and constantly shifting interest rates are making you nervous, you’re in good company. Plenty of investors are hunting for more stable investments, such as gold. That’s because this precious metal tends to do well when the economy is hurting.
If gold sounds appealing, don’t pull out your wallet just yet. There’s a right time and a wrong time to buy gold. Ignore timing, and you could end up making an expensive mistake.
That said, when should you buy gold? Discover the best times to make a precious metals purchase in this guide from Preserve Gold.
The Ever-Changing World of Gold Market Dynamics
If you’re wondering when you should buy gold, take a look at its historical performance. History isn’t necessarily destined to repeat itself, but it can give us some insight into how gold might perform in the future.
Let’s start a few decades back. According to the Federal Reserve History, the year 1971 saw the end of the Bretton Woods system, which canceled the fixed exchange rate between the U.S. dollar and gold. What followed was a period of high unemployment, poor economic growth, and skyrocketing inflation. In turn, gold prices surged and reached a record high price of $843 per ounce by 1980.
In 1999, thanks to an oversupply of gold and a strong U.S. dollar, the price of gold plummeted to a shocking low of $253 per ounce. Several years later, in 2008, the infamous Great Recession struck. Consumers seeking a way to protect themselves financially turned to gold, and its price jumped to $1,300 by 2010.
Then there are anomalies like the COVID-19 pandemic. In 2020, the pandemic caused such economic uncertainty that gold’s price jumped to $2,000 by the summer of that year. After the pandemic’s peak, prices dropped to $1,700-$1,900 and rebounded to $2,000 by late 2023.
As you can see, gold prices tend to leap when consumers feel uncertain about the economy and plummet when the dollar is strong. In addition to historical predictors, it is smart to pay attention to seasonal trends.
Historically, gold prices tend to fall in late April, February, and October. If you’re wondering, “When should you buy gold to get the lowest price?”, these months are good bets. Prices usually jump in December and January.
Signs That Now Is a Good (or Bad) Time To Buy Gold
One good thing about gold is that it’s fairly easy to predict its price. For example, the price of gold is closely tied to inflation. When inflation rises, the dollar buys less. In turn, consumers seek safer investments like gold as an inflation hedge. This increased demand leads to higher prices.
Interest rates also have a peculiar effect on gold prices. There’s an inverse relationship between them. When rates are high, gold prices drop because it’s easier to make money from other investments like stocks and bonds. When rates plummet, gold becomes more appealing than stocks, driving up its price.
Geopolitical events can cause gold’s price to skyrocket as well. For example, after the September 11, 2001, terrorist attacks, gold prices leaped by about 6% in one day. More recently, at the beginning of Russia’s invasion of Ukraine in 2022, prices jumped by a shocking 10%.
Currency fluctuations can impact the price of gold, too. That’s because gold prices are in U.S. dollars, and when the dollar’s value decreases, it’s cheaper for people in other nations to buy gold. The more people buy gold, the lower the supply and the higher the price.
Lastly, the stock market can strongly impact the price of gold. If investors think the price of gold will rise, for instance, they might stock up on the precious metal, causing its price to jump.
Timing Your Gold Investments Like a Pro
When should you buy gold? There are plenty of factors to consider before taking the plunge. If the thought of potentially buying gold at inflated prices makes you nervous, consider a fairly safe strategy called dollar-cost averaging.
This strategy involves regularly investing a fixed amount at certain times regardless of how the market is doing. For example, suppose you invest $50 into gold each month. When gold prices are high, your money buys less. But when they’re low, you’ll get more gold for your cash. The biggest benefit is that you’ll pay less per share overall than you would if you bought all your shares at once. Plus, it’s less stressful than watching gold prices like a hawk.
If you’re more of a hands-on type, start following news and financial forecasts. Doing so will help you anticipate where the gold market will go next. For instance, if there’s news about an impending interest rate cut, you may want to talk to your financial advisor about stocking up on gold. Remember, gold prices tend to increase when interest rates drop, so it’s preferable to buy before that happens.
You can also use data and economic indicators to inform your gold purchases. Such data can help you keep track of price changes and can tell you whether gold’s value is trending up or down.
When analyzing charts, pay attention to support and resistance levels. Support levels indicate when the price of gold usually stops falling, while resistance levels show when its price quits rising. Many analysts recommend buying gold at support levels.
Watch the relative support index (RSI) too. It measures how much and how fast gold prices are changing. An RSI of 30 or less might mean the gold supply is outpacing demand, which translates to lower prices.
Why Patience Is a Must When Investing in Gold
When you were young, your parents probably taught you the value of patience. Those lessons will certainly come in handy for gold investing. That’s because investing in gold is not a get-rich-quick scheme. Generally, the value of gold grows slowly over time. There are ways to make fast money with gold, such as investing in a junior mining company that finds a big gold deposit, but such methods are quite risky.
Another mistake to avoid is making decisions based on short-term market fluctuations. Plenty of amateur investors dump their gold when the market takes a nosedive. However, dips in the market are rarely permanent. An article by Morningstar offers historical data that shows how markets tend to bounce back, even after serious economic crashes. This is why experts generally recommend riding out the storm.
Additionally, don’t put too much stock in the news and market trends. Although analysts have a good idea of gold’s future value, it’s impossible to predict exactly what will happen next month or year. So, when you’re wondering, “When should you buy gold?” use trends and the news as a guideline, not a rule.
Unique Factors That Can Affect Gold Pricing
Technology is constantly evolving, and it is poised to have a big impact on the price of gold going forward. For example, gold mining companies no longer solely rely on manual labor to score their hauls. Now, they can use robots to seek out gold deposits and bring their findings to the surface. This makes it easier for companies to find big deposits.
Global environmental regulations can also affect gold prices. Gold mining companies have traditionally used toxic chemicals like cyanide to extract hard-to-reach deposits, and mines in China and Brazil use a mining method that produces mercury waste. These chemicals can leach into the environment and water supply, poisoning communities and wreaking havoc on wildlife.
For this reason, many nations have created stricter regulations regarding gold mining. Companies may be forbidden from using environmentally hazardous mining practices, which could slow down gold production and drive up prices as they adopt greener practices in accordance with rising global standards.
Gold purchases by central banks can drive up prices as well. Central banks have always hoarded gold, but they’ve ramped up purchasing significantly as of late. In 2022, they snapped up 1,082 metric tons of the shiny stuff. Reasons behind the uptick in gold purchases include economic uncertainty, falling interest rates, rising inflation, and worries about tariffs.
Making the Right Gold Investment Decisions
When it comes to succeeding with gold, it’s all about timing. Generally, you’ll score the best prices in February, October, and April, but there are other factors affecting gold’s price, too. To get a good deal, keep an eye on market trends and the economy. You could also stick with the dollar-cost averaging strategy, which is less stressful and tends to yield steady returns.
Of course, precisely when to buy and sell gold depends on your specific financial goals. Always talk to a financial advisor before making any significant gold purchase.
Now that you know the answer to “When should you buy gold?”, we welcome you to reach out to us at Preserve Gold. We offer an excellent selection of gold coins and bullion, and we’re happy to help you set up a gold IRA. Browse our catalog of gold products or call Preserve Gold at (877) 444-0923 to learn more.
