April 13, 2024

The gold price has been on the rise and a lot more people have had their interest piqued. It’s not surprising that the price of gold would go up. When global currencies fall the price of gold rises. Gold is one of the few assets you can be certain of in times of turmoil.

If you are wondering if you should buy gold bullion now just look at all the people and institutions that are buying this precious metal. Central banks should be under strain because of the amount of new money that has been printed. They would want to protect themselves by buying gold and that is exactly what a lot of banks have been doing- increasing their gold reserves. A lot of the central banks have been buying gold to reduce their exposure to the US dollar. Countries like China, India, Russia, Turkey, and the likes of Azerbaijan have been buying up gold since 2018.

According to the World Gold Council, retail gold investments have been rising steadily by 4% since 2018.

Since the Global Financial Crisis (GFC), more individuals have been putting their money into assets that might have fewer returns but higher safety margins. This is a strategy that many began to develop after incurring huge losses in the Global Financial Crisis of 2008. Even the younger generations or millennials have become more risk-savvy and are opting for long-term conservative investment solutions.

More people are beginning to buy gold and they see gold bullion as a strategic asset because of its low correlation to other major asset classes and currency in recessionary periods. This precious metal can be liquidated better than other financial securities.

Are we seeing a gold bull or bear?

For gold to perform well the market needs to be a bullish one. Certain variables indicate whether gold will be bullish or bearish. 

  • Unstable financial markets
  • Political and economic instability
  • Trade wars
  • Protectionist economic policies
  • High inflation
  • Looming recessions

All these have been happening and impacting more than just the gold price but the value of the US dollar.

Economic Reforms:

Emerging markets are beginning to play a pivotal role in the long-term performance of assets like gold. Take China, for instance, its Belt and Road Initiative might be controversial but it is pushing a vision of reducing commercial barriers. India has also been actively modernizing its economy to promote fiscal compliance.

A bullish gold market has signs of a strong market. In late 2015 to early 2016 gold was experiencing low prices 

bearish lows the gold price reached $1,360 and reached a resistant level of $1,380 which lasted for nearly 5 years. However, gold broke through reaching $$1,420 -$1,450 which experts called a bullish market. In 2019, the price of gold made significant gains reaching its highest level of $2,068 in August 2020. The price spike showed that the gold market was a bullish one.

Gold is an emotional metal, and the sentiment is a major driver of price.

The gold price is often driven by sentiment and emotions. In the short term, the gold price will be heavily influenced by risk perception, US dollar strength or weaknesses, and the influence of structural reforms.

In the long term, emerging markets are expected to support gold as an investment asset. These emerging markets make up for nearly 70% of the gold demand is consumed by emerging markets and the developing middle class.

As everyone eyes gold looking to buy, silver also needs a close look.

At the end of 2018, silver was sluggish and down 15%. Silver is a hybrid metal, it is part investment asset but also used in an increasing number of industrial applications. It is poised to become the leading precious metal in 2019.

About 65% of the silver produced is used in the manufacturing industry more commonly in electrical and solar energy applications. The key drivers of the silver price are the rising global industrial productions. With the world shifting towards sustainable energy resources, the silver demand is likely to grow. Like gold, silver will also be influenced by inflationary economies, tight labour markets, and higher government spending and debt.

The price of gold and silver move in tandem with each other. That is why the golf/silver ratio is such an important indicator. The current ratio stands at 80:1. This makes gold a good asset to sell invest in right now. To have a balanced investment portfolio, don’t put all your eggs in one basket. Split your investments between gold, silver, and other assets like stocks or cryptocurrency.

When investing use funds you do not need to cover liabilities or cover what your current lifestyle requires.

Be cautious about investment analyses or trying to predict prices based on past performance. Gold may not have recurring price patterns and even if there seems to be a trend, there is almost no guarantee that some unexpected developments may influence the Movement of the gold price. If you are looking to buy gold tread carefully, ask for help to avoid making unnecessary mistakes.