Investing in Gold in December
Gold investment 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 observed the month of January as the ideal month for buying gold in anticipation of an increase in prices that will occur in February. What's driving this pattern? There are historically three main reasons to purchase in the present time.
1. Economic growth
In the past, gold has always done well during periods of economic growth. This is why it's often seen as a good hedge against the effects of inflation, increasing interest rates and the uncertainty of macroeconomic. While past performance is no assurance of the future, the current economic environment is expected to create an ideal backdrop for gold.
The US economy seems to be on track for a soft landing, and that could give rise to renewed investments in precious metals. Dutch lender ING recently forecast that the Fed would cut rates by up to 150 basis points between 2024 and 2024. That, combined with continuing central bank purchases, will push prices higher.
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Metals that are precious don't generate income, but they tend to appreciate when inflation increases and conventional financial assets are subject to the risk of volatility. It's the reason why investors are drawn to seeking out physical gold during volatile periods like this one.
Gold's price is a reflection of global supply and demand. Therefore, purchasing gold at a low price can be a good way to get the most value for money. But be wary of unscrupulous sellers that may employ methods of sales that are high-pressure to pressure buyers into making a purchase. Make sure that any vendor you're looking at has been registered with the National Futures Association before committing to a transaction. If you're considering investing in gold, you should be sure to weigh the pros and cons of different options carefully.
2. Indian wedding season
As the Indian wedding season kicks in and the jewelry market for gold is expected to increase. The traders will want to make money from this pattern, since gold prices generally increase during this period. This is due to the diverse factors that impact gold supply and demand, including the rate of inflation, interest rates as well as currency fluctuation.
Indians traditionally splurge with gold during wedding celebrations. They use the metal for jewellery, decorate their homes with it and offer it as a gift to relatives. This makes up a large portion of the country's gold demand.
This year, weddings are anticipated to bring in a total revenue that will amount to 4.25 trillion dollars ($51 billion) in the span of 23 days from November 23-December 15, according to the Confederation of All India Traders. Jewelry accounts for the majority of the demand. an analysis conducted by Mumbai's Zaveri Bazaar shows a rise in the demand for jadau and antique jewellery.
Despite global uncertainty, Indians' sentiment toward gold remains resilient. That's partly because of the long-standing connection between Indians and the yellow metal and also due to the fact that gold offers protection from inflation and other dangers. The fact that it's inherently rare and difficult to extract adds value for some investors as well.
3. Uncertainty
It is common for gold to retain its value for long durations however, it's not immune to the volatility of markets. It doesn't matter if it's due to geopolitical issues as well as political instability, or even central bank policies the price of gold are prone to fluctuation at any time. It is particularly so when the market is anticipating the result of a major moment, like an Fed rate hike.
As a safe haven, gold's price is often increased during periods of uncertainty. The reasons behind these uncertainties can be devious and can differ from one person to the next. Some investors could be worried about a slowdown in economic growth, or the printing of money that could lead to inflation. Sometimes investors might be concerned about the effects of war or recession on the world economy.
In times of uncertain times, it's not uncommon for investors to turn to gold in order to diversify their portfolios. The investment in gold during a time of uncertainty can provide investors with the opportunity to buy the metal for a lower price, which can amplify their potential for future gains.
Despite recent declines in prices for gold, a lot of 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 predicts that gold will hit $2,500 per ounce next year, citing the lower rates of interest, constant geopolitical tensions, and the weaker dollar as key the main factors.
4. Inflation
Historically, gold has served as a safe hedge against inflation. In the event of rising inflation concerns the gold market can rise in demand because investors want to secure their buying power. Gold is also regarded as an investment that can be considered a security measure, often performing well during times of recession. The performance of gold during the Covid-19 pandemic was testament to this.
Diversify your portfolio through investing in mining companies as well as exchange traded funds (ETFs) focused exclusively on gold. These strategies offer a cheap access to gold, and offer a range of possible benefits, including diversification as well as leverage.
The ideal month to purchase gold isn't always obvious - it depends on many different variables. However, over the past twenty years the months of November and December are the best months to make investments in gold. This is because, generally, prices for bullion increase in January.
In 2023 a variety of elements helped raise the price of gold. The increased risk of geopolitical instability contributed an estimated 5% to returns and mitigated a drag due to rising interest rates. Through the year, a round-trip in yields - nominal and real - contributed around -3% to returns, however central bank purchases helped soften this impact. In addition, falling inflation boosted prices by providing an income substitute for savers and increasing demand from retail stores in emerging markets. This combination of positive drivers helped gold prices return more than 7% for the year.