Gold has always been a valued commodity. In 1972 the Varna Necropolis site was unearthed in Bulgaria, revealing the first known instances of processed gold. Scientists discovered gold coins, jewelry, and trinkets dating back to 4,500 B.C.E.
Human history will forever be intertwined with gold. The ancient Egyptians were the first to establish a currency exchange ratio for gold and silver based on their value. Gold played a part in the religious ceremonies of the Mayans and Aztecs. Privateers plundered gold from merchant ships during the Golden Age of Piracy.
Just as it is now, gold was a symbol of wealth and power — a true symbol of status. Without it, we wouldn’t have the global economic systems in place that we have today.
People are still investing in gold 6,500 years after the ancient people of Varna, Bulgaria were lost to history. With that kind of track record, there must be some pretty good reasons.
Why Invest in Gold?
As mentioned above, there has never been a point in human history where gold hasn’t been a valuable commodity. Here are some reasons why people have been investing in gold for many years.
Hedge Against Inflation
Gold is a dollar-denominated metal that generally reacts inversely to what is happening to the value of the dollar. When the value of the dollar is strong, the price of gold drops. When the price of gold drops, more people buy gold because it’s cheaper and they can buy more of it. When there is a surge in demand for gold, the price starts to go up again due to the laws of supply and demand.
Gold can also be helpful during deflation. When the price of goods and services drops, gold’s spending power can increase dramatically. In fact, it’s more likely that gold’s spending power will increase during deflation than inflation.
Because of gold’s tendency to react inversely to the value of the dollar, it is frequently used by investors as a way to hedge against inflation.
Times of Uncertainty
During times of political and economic uncertainty, buying gold can be a great move to protect your financial security. While your gold might not skyrocket in value, the odds of its value plummeting are pretty slim. The same can’t be said for a country’s local currency. In extremely volatile times, banks can become insolvent and you might not be able to access your money.
Moving your money into gold during times of uncertainty can help protect your wealth until the situation begins to stabilize.
Historically, gold goes in the opposite direction of stocks. So, in the event of a market crash, your gold would increase in value. It’s another form of hedging. When everything in your portfolios is similar, you’ve put all of your financial eggs in one basket. Gold helps to prevent this mistake.
How Much Gold Should You Buy?
Depending on your individual situation and risk tolerance, you might be comfortable with a little more or a little less than the next person. Many experts recommend making gold at least 5% to 10% of your portfolio. Of course, you can always add to that if you suspect that the stock market is about to go into a slump.
There is no such thing as a one-size-fits-all gold investment. You must do what is right for you and your financial situation.
When is the Best Time to Buy Gold?
Typically, gold does not revisit the low of the preceding year. That’s great news. It shows that gold steadily increases in value over time. Historically, January, March, and April are the months that gold hits its lows. Of course, there have been times when global events have affected gold prices, but, for the most part, the above-mentioned months have shown themselves to be the lowest gold will go for the year.
In early March gold reached an all-time high of $2,074.60 per ounce — something that isn’t too common, as March is historically when gold prices fall. As of this writing, gold has dropped to $1,675. So, the best time to buy gold might be right now.
The Federal Reserve has been hiking interest rates throughout 2022 to combat rising inflation. If they are successful, it is possible that gold prices will continue to fall, making it an even better time to add gold to your portfolio. Getting into the gold market now would be well timed as the price of gold tends to surge during January and February.
How to Buy Gold
At the U.S. Gold Bureau we make the process of acquiring precious metals painless and safe. We offer a variety of metals in many different forms — from beautiful and rare coins to gold bars.
We know it can be stressful when you are new to purchasing gold. That’s why we have many educational tools to help our clients become knowledgeable savvy investors.
If you are interested in enhancing your investment portfolio, contact our knowledgeable precious metals experts for a consultation.