Investing in Gold in December
Investing in gold is a long-term strategy. If you're trying to maximize your return choosing the appropriate time is vital.
Here at BullionVault we've seen that January has repeatedly been the best month to buy gold ahead of an increase in prices that will occur in February. What's driving this pattern? There are historically three key reasons to buy in the present time.
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1. Economic growth
Historically, gold has performed well in times of growth in the economy. This is why it's often considered a safe bet against rising inflation rates and macroeconomic uncertainty. Even though past performance doesn't provide a guarantee of future results, the current economic environment is expected to create favorable conditions for gold.
The US economy appears to be in the right direction for a smooth economic recovery. This may trigger a renewed investments in precious metals. Dutch lender ING has recently predicted that the Fed will cut interest rates up to 150 basis points in 2024. This, along with the ongoing central bank buying, should push prices higher.
Precious metals don't produce income, but they tend to appreciate as inflation rises and traditional investments in equity are subject to the risk of volatility. It's the reason why investors are drawn to seeking for physical gold in volatile periods like this one.
Gold's price is a reflection of the global demand and supply. As such, buying low is an excellent method to obtain the best value for money. However, beware of unscrupulous sellers who use methods of sales that are high-pressure to force the buyer to buy. Make sure that any buyer you're thinking of buying from has been registered with the National Futures Association before committing to any transaction. If you're planning to invest in gold, make certain to weigh the advantages and disadvantages of each option carefully.
2. Indian wedding season
As the Indian wedding season gets underway, jewelry demand for gold is expected to increase. Traders will be looking to make money from this trend since prices for gold are typically higher during this period. This is because of the diverse factors that impact gold supply and demand such as price increases, inflation, as well as currency fluctuation.
Indians typically spend a lot in gold to celebrate their wedding ceremonies. They use the metal for jewelry, embellish the interiors of their homes and present it as gifts to family members. This is a significant part of the demand for gold in this country.
Weddings this year are anticipated to bring in a total business worth 4.25 trillion dollars ($51 billion) over 23 days between November 23 to December 15, according to the Confederation of All India Traders. Jewelry accounts for the majority of this demand, and an analysis conducted by Mumbai's Zaveri Bazaar shows a rise in the demand for antique and jadau jewellery.
Despite global uncertainty, Indians' sentiment toward gold has remained steadfast. That's partly because of a long-standing cultural connection with gold and also due to the fact that gold provides protection against inflation and other risks. In addition, the fact that it's rare and difficult to mine is a plus for investors of all kinds.
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3. Uncertainty
Gold tends to maintain its value over long periods however, it's not immune from market volatility. Whether due to geopolitical events as well as political instability, or even central bank policies the price of gold may fluctuate at any time. It is particularly so when investors are anticipating the outcomes of an important moment, like an Fed rate increase.
As a safe haven, gold's price is often increased during periods of uncertainty. However, the reasons for this uncertainty can be complex and differ from one investor to the next. In certain instances, investors could be worried about the slowing of the growth of their economy or printing money which can lead to an increase in an increase in inflation. Sometimes investors could be anxious about the effects of war or recession on the global economy.
When there is uncertain times, it's not uncommon for investors to turn to gold in order to diversify their portfolios. Making a bet on gold in a time of uncertainty can provide investors with the opportunity to purchase the precious metal at a discount that can increase the potential of future gains.
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Despite the drop that has occurred in the price of gold, many experts expect gold prices to appreciate in the next few years. Collin Plume, CEO of Noble Gold Investments, a Precious Metals IRA Broker predicts that gold will hit at least $2,500 an ounce by the end of next year. He attributes the lower rates of interest, constant geopolitical tensions and a weaker dollar as the main factors.
4. Inflation
In the past, gold served as a safe protection against rising inflation. When inflation fears flare up, it can boost gold demand because investors want to safeguard their purchasing capacity. Gold is also thought of as a safe haven asset and is often a good performer during recessions. Its performance during the Covid-19 epidemic was a testament to this.
Diversify your portfolio through investing in mining firms, as well as exchange traded funds (ETFs) which focus on gold. These strategies provide a low-cost entry point to gold and can provide possible benefits, including diversification as well as leverage.
The most suitable time to buy gold may not be obvious, it depends on many different variables. But over the last two decades, November and December have proven to be good times to invest in gold. It is due to the fact that, the average price of bullion rise in January.
In 2023, a combination of events helped boost the price of gold. Risks from geopolitical wars added an estimated 5% to gains and helped offset a negative impact from the rising interest rate. Over the year, a round-trip of yields, nominal as well as real - added around -3% to returns, however central bank purchases helped soften this impact. Furthermore, a drop in inflation helped boost prices, providing an income substitute for savers as well as boosting demand for retail in emerging markets. This combination of positive drivers helped gold prices return more than 7% for the entire year.