Is it the right time to buy Gold? - Seeker's Thoughts

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Is it the right time to buy Gold?



 Is it the right time to invest in Gold? Or purchasing the jewelry?  When you decide to buy and the gold price shock you. The question is-

Why is Gold gaining so much while the market is closed, and movement and functions are restricted due to COVID19?


Gold has been considered the safest investment since the beginning. It not only holds the monetary value now but even in the previous era.

Since when mankind has learned about the transactions, the Gold held value. However, this is not only the reason for a sudden increase in gold prices. There are multiple reasons as in lockdown- the prices were at a peak.

This is the only factor; however, there are multiple factors associated with every situation.


After 2012, this is the highest value the Gold has achieved, and there are various reasons behind it.

1.     The connection between Gold and the US dollar

2.     Investment Demand

3.     Central Bank’s Borrowing in Bonds

4.     Economic and Monetary Factors,

5.     New Mine Supply

 

It is very much observant in the economy of the world that whenever the US dollar goes up, the gold rate goes down, and when the US dollar goes down, the gold prices go up.

Therefore, two currencies – Gold and the US dollar are inversely proportional.

International Gold is dollar-denominated. Therefore, if the dollar falls, it increases the value of other currencies, increasing the demand in the commodity. Moreover, if the dollar value goes down, investors start looking for a better and safer alternative. Therefore, they invest more in Gold. That is why the US dollar and gold prices are inversely proportional.


 

Investment Demand

The investment demand worldwide has grown more, as more investors are attracted to Gold as a safe medium of investment. In 2019, Gold gave huge returns, therefore in 2020, when COVID 19 ruined the economy of the entire world--- Investors also started investing in the safer investment sources- Gold.

 

Central Bank’s Buying

Since March 2020, when the entire world struggled against COVID 19 and the federal reserves has to support the business and keep the financial market stability. Therefore, the interest rate has been reduced to help the economy.  Central Bank raised money in the form of Bonds, which gives lesser returns, which again pushed the investors towards gold purchase. The Central Banks also have been investing in the Gold.

 

Economic and Monetary Factors

To understand that gold prices are affected by the monetary policy and economic data as well. Monetary policy controls the interest rates, which can be for bi-monthly or monthly.

Interest rates when they are lower it leads to money loss. As a result, people find Gold more attractive.

Economic data also impacts the gold prices. Factors such as low employment rate, wage data, manufacturing report, and GDP also influence gold prices.  When the countries have low unemployment and higher GDP, people feel secure, which leads to lower Gold Prices.

On the other hand, if the GDP rate is lower, and unemployment goes upward, so the gold prices grow higher due to uncertainty.

 

 

New Mine Supply

In the past few years, the gold miners have reduced the growing production to any cost.

Low gold prices pushed miners from going full mining of Gold.  

Currently the United States, Australia, and Canada absorb a major portion of global spending on exploration. Smaller miners have struggled to convince the investors, but rising in the price of gold will lure investors in producing more.


 

Is it the right time to buy the Gold?

The uncertainty has raised the value of Gold. If you compare, the Gold had provided double-digit returns when the share market and investment went down.

So when is it the right time to buy the Gold?

The gold is expected to rise, but the prices will fall when the market starts functioning at a normal pace.

 However, it is suggested to observe the market and wait untill the dollar regains its strength. 

Usually, after observation of the trends in last decades, it has been found that the gold becomes the cheapest in the month of the March.



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