Is it time to buy gold again? The shiny stuff peaked in 2011 and then fell from its high of $1900. It languishes in the $1300 range these days after dipping below $1200 an ounce at the start of 2014. Gold futures quotes from the CME Group are in the $1300 range through December of 2018 and run up to $1400 and more starting in 2019. Currently the June 2020 quote for futures on an ounce of gold bullion is $1467.90. If this is all there is to look forward to then it is probably not the time to buy gold. But, gold goes up when there is chaos in the world and gold goes up in times of war. There are a lot of hot spots in the world where war could spread. The Ebola epidemic in Africa could spread to other continents. The Western economies could get overwhelmed by rescue efforts and across the globe and drive up their debts. To hedge against the many risks in the world many consider gold investments to be the answer. The question that we pose is if it is time to buy gold now.
When Is the Time to Buy Gold?
It retrospect this is always easy. Buy when the USA goes off the gold standard in 1971 and when the pursuit of the Vietnam War and spending on social programs drives the USA into a decade of inflation. It is time to buy gold when the bursting of the dot com bubble forces the Fed to lower interest rates and start a decade long run up in gold prices. Gold went up from $32 an ounce in 1971 to $800 at its peak in the early 1980’s. Gold went up from $200 an ounce before the end of the last millennia to $1900 an ounce when it peaked in August of 2011. In each case a return of economic, social and civil stability made stocks, real estate, and other investments more attractive and gold took a hit. Now gold has largely fallen out of favor as the US economy strengthens and the risk of high inflation seems unlikely. Is this the time to buy gold? The time to buy is just before things get worse again.
Chaos and Profit in Gold
Israel invaded Gaza again. The fighters in the civil war in Syria are becoming more experienced and better at regular warfare. This appears to be why a previously unknown group is attempting with some success to set up an Islamic Caliphate across Syria and Iraq. The USA is war weary and finally learning that it cannot be the policeman of the world at the high price in blood and treasure that the nation has paid. The Arab Spring in Libya has gone bad with regional fiefdoms vying for power and no central government to replace the dictator, Gadaffi. Russia annexed Crimea, part of the neighboring country of Ukraine and is supporting rebels in a civil war in Ukraine. All that is required for chaos to reign is for one of these areas to go bad in a big way. When that happens the price will gold will go up. In the meantime the wise investor will hedge his risk and a little gold to his portfolio. There are several ways to buy gold for investment. Not all of them require putting gold coins or bar in a safe. It may be time to buy gold to hedge against the risk in an uncertain future.