When Should I Invest in Gold?

When Should I Invest in Gold? Is now a good time? Find out in this post.
Photo by CC user Chepry on Wikimedia Commons

Many experts are recommending to buy gold now, due to its low price as compared to silver and former gold prices. Others say not to invest in gold, as the gold price is likely to fall further. With such no man’s land forecasts, should you invest in gold? Well, let’s assume that no one knows for sure as to what will be the gold price in near future, say, even in the next week.

Well, this boils down to your own perspective of buying gold or waiting for it. A straightforward answer to the question of when to invest in gold is: When you need it! Find out why you want to possess gold. Is there a good, reliable reason to do so or is it just for a making some quick gains, which is unfeasible these days?

Gold, as wealth insurance, is not approachable in the way you approach other investments such as properties and stocks. Timing is not the actual issue. So, start by asking whether you need to own gold or not. If yes, it makes no sense in delaying gold trading or waiting for a more feasible price. Here are some more situations that act as the ideal time for investing in gold.

When Your Portfolio is Not Diversified

If your investments are only in a stock market, it is high time to diversify it even if they are performing well in long-run bullish run. The secret to perfect diversification is to have investments that are not tightly interrelated to one another.

The fact is that the prices will not rise forever. Further, when stocks fall, gold goes up. For example, when the prices of stocks dropped in 2008, the price of gold had increased. Thus, it is ideal to diversify your investment portfolio by letting gold share at least 12%. This can easily protect you from a waning stock market.

When You Want to Evade Crisis or Inflation

Investors tend to make up for losses of other assets by hedging. One of the most common ways to do so is to buy gold. For example, they invest in gold to hedge against the decline of a currency against the American Dollar, which also defends from the subsequent inflation.

However, gold is a better option for hedging against a crisis. This is because the price of gold rises during crisis. Now, this is something that is not necessary during inflation.

The gold prices continued to rise steeply in response to the Eurozone crisis, the unfavorable Obamacare impact, and the Dodd-Frank Wall Street Reform Act. During these times of extreme economic uncertainty, the price of gold doubled in 2011, from what was in 2008.

When You Have a Long-Term Prospect

Gold is highly volatile with high peaks and low gorges. The fluctuation is quite extreme in a short run. So, it is risky to time the market for gold. If you are ready to wait for at least 10 years for selling your gold, it makes sense to invest in it. In this case, it does not matter how volatile the prices are. Buy gold for long term for averaging the highs and lows.