When Should I Buy Gold?

August 01, 2018

When Should I Buy Gold?

Every year, and especially after big market movements, people ask when should I buy gold?

The answer to this question varies. That is to say, there is no objectively ‘right’ answer to the best time to start buying gold, or other precious metals for that matter.  There are, in fact, many different answers depending on your personal investment preferences, risk tolerance, and needs.

There plenty of opinions one when you should buy gold. While Chairman of the US Federal Reserve, Ben Bernanke explained that he didn't really understand gold. One thing is for sure: you should wait until you have enough money so that the 1 oz of gold price will be closer to what you're getting. No matter when you buy, always seek out the lowest premiums over spot.

In an earlier article on what causes gold prices go up and down, we looked at various factors that affect prices. If you follow the maxim of buying when other are selling, you are probably aware that large price swings happen over the long term.

When should I buy gold to take advantage of swings in the market?

It is a fact that gold markets often run on long momentum swingsup and down. Consider, for example, the four year run from 1976 to 1980 that brought gold from USD $500 to USD $2,150). You want to catch it on the upswing if you don’t have much to invest, and that means waiting for the inevitable bubble to burst, which may take years.

Logically, this makes sense for both speculators and investors. Still, it can be quite difficult to time when you should buy gold to take advantage fo market swings. An alternative is to use a dollar-cost averaging (DCA) method. This strategy works for anyone with a longer terms holding period. By accumulating gold (or anything else) over a period time, you are smoothing out the price that you are paying. So long as the shiny metal goes up, you will benefit from owning more at a low price, regardless of your initial motivation.

If you are buying gold bullion with the DCA method, combine it with our earlier point on buying gold closer to the spot price to save even more money. For example, you can accumulate in units of 1 oz LBMA Gold Bars.  This combines the benefits of investing over time, and investing effectively.

When should I buy gold if I think interest rates are going up, or down?

If you think interest rates are going up over the long-term, the price is rarely too high. Unfortunately, none of us have a crystal ball. It could take a few years, or it could take many more for prices to adjust. J. B. Maverick cites historic data of significant increases in interest rates, e.g. the early 1970s, correlate strongly with increases in gold prices.

A more darwinian approach is to take advantage of gold price increases during times of catastrophe and calamity. Buying before an under-appreciated stormy financial of economic event tends to be one of the better times to buy gold.

Case-and-point: David Bleame of Blanchard and Company points out that gold did excellently during the 2008 meltdown. Bleame is of the opinion that current global instabilities make it very likely that a conflict will break out, and thus gold will strengthen.  So if you take Mr. Bleame’s advice, it’s a good time to invest today even if the price per ounce is a bit high.

Should I Buy Gold Bullion Now?

The matter of catastrophes touches on the question so many people are asking: is now the time to buy gold? When should I buy gold to get the highest return? That's a question only you can answer. But we recommend always seeking your own risk tolerance and taking a long-term approach consistent with sound investing principles. The great thing about gold investment is that over the long term, you won't go wrong. As Sarah Max at Time puts it, “gold shines when the outlet for other assets looks bleak”.



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