Investing in Gold in December
The investment in gold is a long-term strategy. If you're trying to maximise your returns, the right timing is essential.
We at BullionVault we've noticed that every year, January is the ideal month for buying gold, ahead of a price surge in February. What's driving this pattern? Historically, there are three key reasons to buy in the present time.
1. Economic growth
In the past, gold has always done well during periods when economic growth. This is why it's often seen as a good hedge against rising inflation rates and the uncertainty of macroeconomic. Even though past performance doesn't provide a assurance of the future however, the present economic climate is expected to create favorable conditions for gold.
The US economy appears to be in the right direction for a smooth economic recovery. This could give rise to renewed investments in precious metals. Dutch lender ING recently forecast that the Fed will cut interest rates up to 150 basis points in 2024. This, along with the current central bank purchases could push prices up.
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The precious metals do not generate income but tend to appreciate when inflation is rising and traditional investments in equity are subject to volatility. It's the reason why investors are drawn to seeking out physical gold during turbulent time frames like the present.
The value of gold is an indicator of demand and supply in the world. Therefore, purchasing gold at a low price can be a good method to obtain the best bang for your buck. However, beware of unscrupulous sellers that may employ aggressive sales techniques to pressure buyers into making a purchase. Make sure that any buyer you're thinking of buying from has been registered with the National Futures Association before committing to an agreement. If you're thinking of investing in gold, make sure to consider the advantages and disadvantages of each option carefully.
2. Indian wedding season
As this Indian wedding season gets underway the demand for jewelry made of gold is likely to grow. The traders will want to profit from this seasonal trend, as gold prices are typically higher in this time. It is due to diverse factors that impact the supply and demand for gold in the form of inflation, interest rates, and currency fluctuations.
Indians usually spend money on gold for their wedding ceremony. The metal is worn as jewelry, embellish the interiors of their homes and offer it as a gift to their family members. This is a significant part of the demand for gold in this country.
The wedding season is anticipated to bring in a total amount worth 4.25 trillion dollars ($51 billion) over 23 days between November 23-December 15 according to the Confederation of All India Traders. Jewelry accounts for the majority of this, and a recent survey by Mumbai's Zaveri Bazaar shows a rise in traction for antique and jadau jewellery.
Despite the uncertainty around the world, Indians' sentiment toward gold is still steadfast. That's partly because of an ongoing cultural affinity with the yellow metal as well as the fact that it protects against the effects of inflation as well as other threats. Its inherent scarce and hard to mine is a plus to some investors too.
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3. Uncertainty
It is common for gold to retain its value for long durations However, it's also susceptible to the volatility of markets. It doesn't matter if it's due to geopolitical issues, political turmoil or central bank policies, gold prices are prone to fluctuation on any given day. This is particularly true when investors are anticipating the outcomes of an important event, such as the possibility of a Fed rate hike.
In its role as a security measure the price of gold is usually raised during times of uncertain times. But the causes for these uncertainties can be devious and vary from one investor to the next. Some investors could be worried about the slowing of economic growth, or the printing of money which can lead to an increase in inflation. Other times investors might be concerned over the consequences of a recession or war in the global economy.
In these times of instability, it's common for investors to turn to gold in order to diversify their portfolios. Investing in gold during a time of uncertainty can provide investors with the opportunity to buy precious metal for a lower price and increase their potential for future gains.
Despite recent declines in gold prices, many analysts are expecting the price of gold to increase in the coming year. Collin Plume, CEO of Noble Gold Investments, a Precious Metals IRA Broker, says that gold could reach at least $2,500 an ounce by the end of next year, citing lower interest rates, continuing geopolitical tensions, and a weaker dollar as the main factors.
4. Inflation
Historically, gold has served as a safe security against the rising cost of inflation. When inflation fears flare up the gold market can rise in demand, as investors try to safeguard their buying capacity. Gold is also considered a safe haven asset and is often a good performer during recessions. Its performance during the Covid-19 pandemic was testament to this.
Investors can diversify their portfolio through investing in mining companies as well as exchange traded funds (ETFs) focused on gold. These strategies offer a cheap access to gold, and can provide potential benefits including diversification and leverage.
The best month to buy gold isn't always obvious - it's contingent upon a myriad of factors. In the past twenty years the months of November and December have proven to be good times to make investments in gold. This is because, generally, prices for bullion are higher in January.
In 2023, a mix of events helped boost the price of gold. Elevated geopolitical risk contributed an estimated 5% to the returns, and also slowed the impact due to increasing interest rates. Over the course of the year, an increase in nominal yields and real, contributed about 3.3% of returns but central bank buying helped soften this impact. Furthermore, a drop in inflation boosted prices by providing an income substitute for savers and increasing demand from retail stores in emerging markets. These positive forces helped gold prices return more than 7% for the whole year.