A question we are often asked is when the best time to invest in gold is?
Sadly, there is no exact science for forecasting when gold prices will increase. In fact, gold recently has not reacted to how even the most seasoned analysts had expected.
Some had thought that the precious metal’s prices would have climbed in 2015 because of factors such as the Greece bailout situation. Prices did not generally. As we said at the time, our feelings were that investors were holding back and waiting to see how the situation would pan out.
Gold historically performs better during times of economic uncertainty. We saw this during the recent financial collapse. Between 2008 and 2012, worried investors turned to the metal to protect their portfolios; the value of gold climbed dramatically as a result. The US Producer Price Index (PPI) for gold ores, for instance, increased by 101.1% during that period.
Then in June 2016, following the EU referendum, gold became more appealing as shares tumbled. Gold also nudged up after Trump’s presidential win before settling back down again.
When interest rates are high, investors tend to back savings accounts because they may offer a better return on investment at the time.
In the US, interest rates have increased. The Federal Reserve raised its benchmark interest rate by 0.25%. It is only the second increase in a decade.
However Fed chairwoman Janet Yellen said the US economic outlook was "highly uncertain" and the rise was only a "modest shift". Nevertheless, this rise will have some bearing on investor demand for gold in the short-term which could be reflected in a fall in global gold prices.
In the UK, though, it is thought that interest rates could be cut further. This potentially could make the precious metal attractive as UK investors look for different ways of spreading their portfolios.
Where does this leave you if you are considering when the best time to invest in gold is. Our advice for investors – we’ve been trading since 1981 – is to accept that there will always be points when the price of gold dips and indeed increases. As we have seen, when there is economic uncertainty, there is a chance that gold prices could climb.
What we can say for certain is that the world economy is very volatile. We do not know how our own economy will perform when we leave the EU. Nor do we know what impact the UK leaving will have on the EU. Then there is any impact arising after Trump is sworn in, and India’s decreasing demand for gold.
Our advice for investors is to consider gold as a medium to long-term investment. We suggest investing no more than 15% of a portfolio. For instance, your self-investment pension (SIPP) portfolio could include:
• Exchange traded funds (ETF)
• Unit trusts and Open Ended Investment Companies (OEICs)
• Gilts and corporate bonds
• Investment trusts
Find out more about SIPPs.
We would also like to dispel the myth that you need to be rich to invest in gold. We offer a range of quality gold coins and gold bars to suit most budgets. Gold coins, in particular, can make attractive gifts such as Britannia coins. Our gold is often the cheapest on the market – you can trust us.
If you are thinking of buying physical gold for the first, please talk to us. We’re not only extremely knowledgeable but we also friendly too! You are welcome to pop into our City offices near Bank for a coffee and a chat if you would like (please arrange first):
Gold Investments Limited
88 Gracechurch Street
London EC3V 0DN
Tel: 020 7283 7752
Fax: 020 7283 7754
We can also take payments and store physical gold securely – our vaults are in the London Silver Vaults, Chancery Lane.
Oliver Temple is a senior bullion dealer at Gold Investments Ltd.
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