As the trade war with China begins and the dollar continues its decline, gold is going up in price. At this moment an ounce of gold is worth $1338. GoldPrice.org shows us how gold has done against the dollar in the last minutes, hours, days, months and years in this chart.
Obviously gold is going up in price as the Chinese slap tariffs on pork, fruit, and ethanol in retaliation for US tariffs on steel and aluminum. The Trump administration is looking at tariffs on Chinese tech products and the long-feared trade war is probably upon us. Add the economic damage of a trade war to an already-falling US dollar and you have an ideal scenario for why you might want to buy gold today.
Timing Is the Key
When investing in gold, timing is all important. Anyone who bought gold in the early 1970s when Nixon took the US dollar off the gold standard made out like a bandit. And anyone who stayed in gold until it fell off in 1980 lost part of their gains, or all of their investment if they had just purchased the shiny stuff. Then as the long economic and market rally of the 1980s and 90s took place, gold went to sleep arriving at 2001 at around $275 an ounce. Then the dot com bubble burst, interest rates fell, and gold went on a tear again right into the Great Recession. In 2011 gold briefly traded at $1,900 an ounce and was selling for $1,600 in 2012 before in fell back to the $1,060 range by the end of 2015.
As the Gold Price chart shows, gold is down nearly 15% from 5 years ago and up 335% from 16 years ago. Anyone who timed the gold market correctly has made money in the process. And, why might you want to buy gold today? Gold is an ideal refuge in times of political, economic, and social uncertainty.
How to Invest in Gold
We looked at investing in gold in an article published 8 years ago.
There are a number of attractive options for investing in gold and there are pitfalls. Gold stock investing includes mining companies and derivatives. Many gold bugs will say that how to invest in the stock market during hard economic times is to invest in gold. However, the true gold bug will advise that you buy and hoard gold bullion or rare gold coins. A current scare tactic in the gold coin market is that “the government will come again for your gold.” Roosevelt signing his executive order to prevent gold hoarding is rewritten as the confiscation of gold. Gold peaked in 1980 after a decade of inflation and promptly dropped. Gold bullion has not made it back to 1980 prices adjusted for inflation despite a fourfold increase in value in the last decade.
We noted that gold mining stocks often go up in price farther and faster than gold itself as a gold rally starts. And these same stocks go down faster and farther when gold loses its luster. There are gold ETFs in which you can invest and not have to worry about secure storage of your gold coins and bars.
Portfolio diversification should apply to when you buy gold as an investment, or bitcoins, or any investment. If you pull all of your money from all other investments and buy gold you had better be right. The better choice is to treat gold like the purchase of a single stock as part of your portfolio. This approach will lessen your gains in a gold rally and protect you from disaster if you timing of the gold rally is incorrect.