Investing in Gold in December
Investing in gold can be a good long-term investment. However, if you want to maximize your return choosing the appropriate time is vital.
Here at BullionVault we've seen that January has repeatedly been the most profitable month to purchase gold ahead of a price surge in February. What's the reason behind this trend? Historically, there are three key reasons to buy right now.
1. Economic growth
Historically, gold has performed well in times of growth in the economy. This is why it's often thought of as a great hedge against rising inflation rates, and uncertainty in macroeconomics. Even though past performance doesn't provide a guarantee of future results however, the present economic climate appears to be positioned to provide an ideal backdrop for gold.
The US economy is on track for a soft economic recovery. This may trigger a renewed interest in investment into the precious metals. Dutch lender ING has recently predicted that the Fed will cut interest rates as high as 150 basis points by 2024. This, along with the current central bank purchases could push prices up.
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Metals that are precious don't generate income but tend to appreciate as inflation rises and traditional equity assets experience the risk of volatility. That's why many investors seek out physical gold during turbulent time frames like the present.
Gold's price is a reflection of global supply and demand. So, investing in gold with a lower price can be a good method to obtain the best amount of value. However, beware of unscrupulous sellers that may employ methods of sales that are high-pressure to pressure the buyer to buy. Be sure to verify that the buyer you're thinking of buying from is accredited by the National Futures Association before committing to an agreement. If you're planning to invest in gold, you should be sure to weigh the advantages and disadvantages of different options carefully.
2. Indian wedding season
When the Indian wedding season kicks in and the jewelry market for gold is expected to increase. Traders will be looking to take advantage of this trend since prices for gold tend to be higher in this time. It is due to varying factors that influence gold supply and demand in the form of price increases, inflation, and currency fluctuations.
Indians typically spend a lot on gold for their wedding ceremony. They wear the metal as jewellery, decorate their homes with it and present it as gifts to family members. This makes up a large portion of the demand for gold in this country.
The wedding season is anticipated to bring in a total business that will amount to 4.25 trillion rupees ($51 billion) in the span of 23 days from November 23 and December 15 according to the Confederation of All India Traders. Jewellery accounts for the bulk of the demand. the latest survey conducted by Mumbai's Zaveri Bazaar shows a rise in the demand in the market for antique and jadau jewelry.
Despite the uncertainty around the world, Indians' sentiment toward gold remains resilient. That's partly because of the long-standing connection between Indians and gold, but also because gold protects against the effects of inflation as well as other dangers. Its inherent scarce and hard to mine adds to its value to some investors too.
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3. Uncertainty
Gold tends to maintain its value for long durations, but it isn't immune to the volatility of markets. Due to geopolitical developments as well as political instability, or even central bank policies that affect gold prices, they can be volatile at any time. This is especially true in the event that investors are awaiting the result of a major occasion, like a Fed rate hike.
In its role as a security measure and a safe haven, the value of gold is frequently raised during times of uncertainty. The reasons behind the uncertainty may be a bit ambiguous and vary from one investor to another. In certain instances, investors might be worried about the slowing of economic growth or money printing which could cause inflation. Sometimes investors could be anxious about the impact of war or a recession in the global economy.
In times of instability, it's common for investors to look to gold in order for diversification of their investments. The investment in gold during a time of uncertainty can give investors the chance to buy the metal at a discount and increase their potential for future gains.
Despite recent declines in the price of gold, many analysts are expecting the price of gold to rise next year. Collin Plume, CEO of Noble Gold Investments, a Precious Metals IRA Broker, says that gold could reach $2,500 per ounce next year, citing the lower rates of interest, constant geopolitical tensions, and a weaker dollar as the main factors.
4. Inflation
Historically, gold has served as a solid security against the rising cost of inflation. If inflation worries rise and gold prices rise, this can increase demand, as investors try to protect their purchasing capacity. Gold is also thought of as an investment that can be considered a security measure that is usually able to perform well in times of recession. Its performance in the Covid-19 epidemic was a testament to this.
Investors are able to diversify their portfolios by investing in gold mining firms, or exchange-traded funds (ETFs) that focus specifically on gold. These strategies provide a low-cost way to get into gold and offer a range of advantages, such as diversification and leverage.
The best month to buy gold may not be obvious, it's contingent upon a myriad of aspects. But over the last twenty years The months of November and Decomber have been good months to buy gold. The reason is that generally, prices for bullion are higher in January.
In 2023, a combination of events helped boost the prices of gold. The increased risk of geopolitical instability contributed an estimated 5% to gains and helped offset a negative impact due to the rising interest rate. Over the year, a round-trip in nominal yields and real, contributed about 3 percent to the returns however, central bank purchases has helped to mitigate this effect. Furthermore, a drop in inflation helped boost prices, providing savings with a source of income and boosting retail demand in the emerging markets. This combination of positive drivers led to gold prices rising higher than 7% over the year.