The price can vary a lot in a short space of time. Many would ask when should I buy or sell the gold I have? There are a number of different factors that can affect the price of gold. To answer the question of when the right time to sell is, one has to take these factors into consideration. There are really four questions you should try and get answers to:
- What do experts think about the future of gold in the short term?
- What do they say will happen in the long term?
- Why do have gold (Is it for security to hedge against unexpected events)
- Do you want to make a profit from the gold you have?
What factors and events affect the price of gold?
Historically, the price of gold rises when an unexpected event occurs which increases the levels of uncertainty. This could be something like a sudden outbreak of war or the sudden outbreak of a health crisis. However, it could be something less dramatic like an unexpected referendum. The bottom line is that events that affects the financial markets and causes shares to fall all at once, the gold price reacts by going up as people look for a safe haven asset to invest in.
The price of gold also tends to rise a little bit more subtly when world markets are a little uncertain. People will still want to consider safe haven investments like gold if they are unsure of where the future is going. The price will rise less dramatically because there is no immediate threat.
Inversely, economic certainty and global prosperity drives the price of gold down. The world was pretty much prosperous in this last century. There were a few wars and no sudden catastrophe which left a lot of investors buying gold to expand their portfolios. At such low prices, when you have to sell your gold, you wouldn’t be getting as much as you would get when prices are pushed up by market conditions and geopolitical crises.
Why should you own physical gold?
Different people buy gold for different reasons. People who buy gold bullion usually buy it as an investment. Jewellery is a different matter altogether. People will keep their gold and hope to sell gold bullion for profit. If this is you, then you have to focus on short term market fluctuations. It’s a lot like trading stock, you buy when the price is low and sell gold bullion when the chance of making a profit is high. You would need to be able to read the markets and the able to judge when the price is likely to increase. This is tricky for someone who has little knowledge about the gold market. Most people don’t get speculation right. If you did you would have been one of the people who bought gold when it was just $250 in April and knew to hold off selling until August 2011 when the price had gone up 6 times. You would have needed a crystal ball to predict where the price of gold was going? Even experts who have decades of practical experience have a low success rate of finding the perfect moment to sell gold bullion.
Overall, gold is a safe haven investment. The price often moves independently to price movements of other assets. This means that when your shares and the value of your property goes down, the price of gold will move in the opposite direction. Moreover, physical gold does not have any counterparty risk like savings you would live in an account in a bank that could fail if the financial markets came tumbling down like they did in 2008. So gold, in any form is regarded as a safer asset in the most extreme economic stresses.