The gold bullion market offers some unique advantages to investors compared to other assets. Gold is highly sought after for its durability and enduring value. The very wealthy often own gold as a means of intergenerational wealth transfer. While it does not provide a return, it does provide a level of security and assurance that is vital to the wealthiest people in the world. I personally also buy physical gold bullion as a way to preserve value for better times when economic problems begin to increase.
In order to take advantage of these benefits, it would be helpful if investors could access the gold market at a discount. In fact, when the stock market shows high volatility and uncertainty about economic growth, the price of gold rises. Buying a share of gold before the price rises can make your portfolio more resistant to financial fears.
Timing the market is no easy task, but a price crash is always a good opportunity compared to early performance. Here’s what’s happening in the gold market, and now may be a good time to get in
Interest rates are rising rapidly
You may have often heard that gold is an inflation hedge. The data shows that in the long run, this is confirmed. Gold has proven to retain its purchasing power for decades, if not centuries; in the short term, the situation becomes more complicated.
Central banks around the world are rapidly raising interest rates due to rapid inflation. Their goal is to make it more expensive to borrow money, thereby reducing the supply of money entering the economy and reducing overall spending.
While rising interest rates make it more expensive to borrow money, it also becomes more profitable to do so, which is what investors are buying bonds for. As with gold, bonds are seen as a safe asset suitable for defensive investment strategies.
Growth Continues Despite Fears of Recession
Despite the near certainty of a recession in the next few years, unemployment continues to fall as the economy continues to grow. Strong economic growth usually means that investors are not too worried and have no incentive to put their wealth into gold.
However, high inflation means that central banks around the world are actively seeking to hold down spending. Monetary policy is focused on triggering recessions – albeit as mild as possible – to dampen price increases.
While the market could move in any direction, there are strong indications that now is a good time to buy gold. If you would like to learn more about gold, click here.