Gold’s value changes every day. The gold price reflects the value of gold and it is a very valuable metal. It is a rare and useful material which makes it one of the most popular raw materials. The primary use of gold both now and historically is jewelry. Other than jewelry and ornamental use, gold has applications in different fields like electronics, medical, aerospace, dentistry, and computers. If you have heard the term “supply and demand”, gold is the perfect example of that. Because gold is a rare and useful material, there is a limited supply of it. People wanting gold is what drives the demand. For these reasons, gold in the same common quantities as other metals is extremely expensive. In other words, the price of gold depends on the quantity being purchased.

It is not the rarest metal, but rare enough. Chemistry is the reason gold is rare. In comparison to other elements, Gold is very dense, which makes it one of the heavier elements. It’s hard to find because it takes enormous pressures and energy for nature to make it. Therefore all of the gold we find now on earth is from that event. This makes gold not only rare on Earth but also throughout the universe. Although we now have the ability to make gold in the lab, it is on a tiny scale and not commercially viable. In total, gold is a finite material with unique properties and is not easy to find like other common metals.

The value of gold is inversely related to the value of the US Dollar. This means that when the US dollar is strong, the value of gold is lower, and when the US dollar is weaker, the value of gold increases. Part of this is because you can purchase more gold when the US dollar is weaker. In total, the amount of gold in the central bank reserve, the value of the US dollar, the desire to safeguard against inflation, and the demand for jewelry can make the price of gold fluctuate.

Unlike other commodities like oil and coffee, you can not economically consume gold. Almost all the gold we have is still around and every day we mine more gold. Wouldn’t this cause gold to drop in value over time? Interestingly, the answer is no. Other than the number of people who want to buy gold is constantly increasing, investment and jewelry demand illustrate some explanation. When gold is purchased in jewelry or raw material form, it ends up sitting someplace for years to come. Essentially, gold in these formats is basically taken off the market for a long time. This prevents any chance of gold supplies from irregularly flooding the market. In short, the price of gold changes due to a combination of supply, demand, and investor behavior.

Since 2020 gold has reached its highest value in history. Gold is almost certainly always trending up if you are looking at it from a long-term perspective. Even with this, gold is still trending up as of now in the shorter run. Up until recently, gold reached its highest peak in 2010 with a decent decline until around 2020. Although gold’s value is less than it was in 2020, since February 2021, there has been a steady linear increase in the value of gold. This is a great sign for short-term gold investors but does not really mean much for long-term investors.

This upward trend can be due to a number of reasons. In general, higher gold prices can be because of inflation, supply, and confidence. These driving factors are in effect today. With the coming of the pandemic, geopolitical tensions, supply chain disruptions, and a sharp inflation impact, people have flocked to gold as a financial safe haven. If these trends continue, or if new problematic factors come into play, gold can easily spike in price up to $2,500 or even $3,000 per ounce, as some experts predict. However, no body can predict the future, which is actually a good reason to invest in gold.

Investing in gold protects your money. Gold has a history of holding its value. Because of this, it is almost a guarantee against inflation. Inflation is when prices rise, and when prices rise the value of the dollar falls. As inflation ratchets up, so too does the price of gold. The weakness of the US Dollar is another reason people invest in gold. Between 1998 and 2008 the US dollar fell in value compared to other currencies. This led people to flock to gold as financial security which raised the value of the gold prices to almost triple its previous value.

There are a number of reasons the US Dollar can drop in value, but in this case, it was the US’s large budget, trade deficits, and a large increase in the money supply. Not only does gold hold its value in financial uncertainty, but it also holds its value well in geopolitical uncertainty. This is why gold is often called the “crisis commodity”. When planning for the future, self reliant people have a reserve of food, water, and other basic necessities. The equivalent of that financially is owning gold to protect one’s money on a “rainy day” geopolitically.   

There is no best time to invest in gold. Just buy. For the average investor or individual, the phrase “buy high sell low” comes to mind. Although this concept is true in most other types of investing, gold is one of the few exceptions. Obviously, if you are looking to buy and sell gold in a short time frame this strategy definitely applies. However, in terms of long-term investing, it doesn’t matter as much because there will still be a substantial increase in the value of your gold from the time you have purchased it. Based on the historical price of gold, investors who include gold in their portfolios are better off.

With this, however, there are yearly trends that you should monitor when choosing to invest in gold. On average, gold tends to rise during the first couple of months of the year. Subsequently, the price generally wanes through the spring and summertime and then takes off again in the fall. So on a historical basis, the most ideal times to purchase gold are early January, March, and early April. Alternatively, another good time to invest in gold would be from mid-June to early July. Therefore the best time to invest in gold is once you have investable funds or savings available try to target these timeframes.

Gold has different takes different forms and purities. In short, the higher the karat, the greater percentage of gold. Because gold is one of the softest metals and easy to manipulate, it historically has been used for making jewelry. However, it is not always ideal to make physical objects out of gold because pure gold lacks the durability to maintain its shape. Because of this often times in minting of coins or making of jewelry, gold is blended with a percentage of other stronger metals like silver and copper. Obviously, gold items that are made with other metals are not as valuable because the object does not contain as much gold. This is not an issue when investing in pure gold or purchasing 99.99% pure gold bars. However, when purchasing gold coins, be aware that many gold coins are composed of other metals.

The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.