Gold is having a moment.
Back in early April, the price of gold surpassed $2,000 for the first time since 2020. Naturally, this got investors pretty excited.
Price of Gold (as of 08/29/23)
Those of you who watch my videos know that I have a pretty notable gold stack of my own. In my case, I actually own something between a collection and a stack, since some of my gold is numismatic and has value beyond the gold content. Regardless, investing in gold is a hot topic right now in 2023, and I want to explore exactly what this might mean for you.
So, as I like to say, enough with the jibber jabber! Here are 5 things to take into account about the price of gold:
1. Gold prices are expected to hit an all-time high
Some analysts predict that gold could trade between $2,500 to $2,600 an ounce, which would be a significant increase from its current price of $1,940.68 per ounce. Gold’s all-time high was $2,075 in August 2020, according to Refinitiv data, and many experts believe it could break this record in the coming weeks or months. In fact, Fitch Solutions predicted that gold would hit a high of $2,075 “in the coming weeks” due to the ongoing global financial instability.
2. The dollar’s loss is gold’s gain
The weakening of the US dollar is one of the factors that can cause the price of gold to increase. This is because gold is denominated in US dollars, so when the dollar weakens, it takes more dollars to buy the same amount of gold. As a result, investors may turn to gold as a hedge against inflation and currency devaluation, leading to an increase in demand for gold and driving up its price. Additionally, a weaker dollar can signal economic uncertainty or geopolitical risks, which can also increase demand for gold as a safe-haven asset. In summary, the weakening of the US dollar can erode its purchasing power and increase demand for gold, which can result in a higher gold price.
3. Central banks around the world are holding gold
Central banks throughout the world hold significant amounts of gold as part of their foreign currency reserves. According to the World Gold Council, as of September 2021, central banks collectively hold around 36,000 tons of gold, accounting for about 10% of the world’s gold demand. This shows that even the world’s most powerful financial institutions view gold as an important asset for diversifying their portfolios and mitigating risks. The fact that central banks hold gold reserves also gives investors confidence in the value of gold as a long-term store of wealth.
4. Gold miner shares – a potential gold mine?
A gold surge is also likely to be bullish for gold-miner shares. Gold-mining stocks tend to be more volatile than the underlying commodity, and they have already been rallying in recent months. If gold prices continue to rise, expect mining stocks to lead the way. Overall, with bond yields, the dollar, and sentiment working in its favor, gold has significant room to run.
5. The benefits of physical gold
Now, I’m not saying you need an Aladdin’s cave full of riches (though this would be nice). But for many, having a collection of physical gold can offer some serious benefits. For example:
- Gold has been a reliable store of value for centuries and has proven to be a hedge against inflation and economic uncertainties.
- It is a tangible asset that can be held and stored outside of the banking system, providing a level of security and privacy.
- Gold is globally recognized as a form of currency and can be easily converted into cash or used for trade.
- In times of economic turmoil, gold often sees increased demand, which can drive up its price, making it a potentially profitable investment (as we’re seeing today).
- Owning physical gold can provide a sense of peace of mind and stability to investors, as it has a track record of retaining value over time, making it a reliable investment option for long-term wealth preservation.
I’ve talked about the best ways to store precious metals here. Personally, I believe it’s important to have at least some physical gold and silver close by for emergencies, but keep the bulk of it safe in the bank waiting for you in the much more likely outcome of your retirement.
The golden ticket
As gold continues to approach its all-time high, there are several important considerations for precious metals investors. It’s important to understand the factors that influence gold prices, including economic conditions, geopolitical risks, and investor sentiment.
It’s also essential to diversify your portfolio to manage risk and consider the different ways to invest in gold, such as physical gold, gold ETFs, or mining stocks. Additionally, keeping a long-term perspective and focusing on the fundamental value of gold can help investors navigate short-term market fluctuations. By staying informed and following these principles, precious metals investors can make informed decisions and potentially benefit from the current gold market.