Gold has been an economic commodity for several centuries. Although it has not been used in day-to-day buying and selling recently, it has remained an investment option. In this article, we will consider the viability of gold as a good investment option in 2024.
Why Do People Own Gold?
Looking at the item as metal, it has impeccable qualities that make it valuable. It doesn’t corrode and is malleable, which makes it a good choice for coins. It holds economic value in several places. However, even more significant reasons exist for people to own or invest in gold.
Currency Fluctuations
Currency fluctuation is a frequent occurrence today. When it occurs, most people turn to gold as a more stable way of holding currencies. When currencies experience increased supply and heightened trade deficits, they are bound to experience a period of weakness, prompting an increase in the purchase of gold.
Protection from Inflation
Inflation is a global challenge that doesn’t seem likely to decrease anytime soon — investing in gold hedges against inflation due to its propensity to rise in value at the cost of other commodities.
There is a mechanism behind this. When inflation occurs, it affects fiat currencies by making them lose their purchasing power. When this happens, commodities (including gold) prices increase. This raises the value of gold for the investor in the long run. Traders can use the TradingView app to track and speculate on the performance of gold.
Diversifying Investment Portfolio
Diversifying your investment portfolio means investing in ventures that do not share similar modes of operation.
For example, an investor can invest in cryptocurrency and then go on to invest in gold. This investment pattern minimizes the risk should there be a market crisis. Interestingly, historical analysis shows that the value and demand for gold rise when other investment options, like stocks, experience a crisis.
Safety During Geopolitical Unrest
Due to the widespread acceptance of gold as a financial commodity, many people resort to it as a form of economic safety during a geopolitical crisis. Crises such as wars, international sanctions, and political uprisings can topple the value of fiat currencies or other forms of investment like real estate. In such scenarios, gold often retains its economic value, if not increases.
Rise in Demand Rate
Before now, gold was precious in cultures and nations where it was stacked to elevate social class or used as jewelry. However, in recent times, it has experienced an unprecedented rise in demand due to investors’ interest. This can be observed from gold’s status on ETFs as a foremost item in commodity trades.
What Influenced Gold’s Recent Bullish Run?
Precious metals have enjoyed an all-time rise in value very recently. An ounce of gold was valued at $2,350 in early April, exceeding past prices. This bullish run was influenced by several factors, one of which was the massive purchase of gold by central banks.
Most investments in gold happen in an ETF and are backed by those who possess the metal. When you invest in a gold ETF, you need the actual gold. However, in this scenario, the value of the ETF is affected by the availability of the metal. Central banks purchase gold in large quantities, while gold ETFs aren’t impressing investors, so sales are slow. The result of this is a bullish run.
When Is the Best Time to Enter the Market?
When it comes to investing in gold, there are no cast-in-stone principles. One can only observe trends and make calculated decisions. However, concerning antecedents, you can look forward to entering the gold market after considering these points.
- When a bullish run is starting: A bullish run is often preceded by inflation and geopolitical uncertainties. Entering the market at this stage allows you to benefit from the continued price rise before a bearish run commences.
- Observing the stock market: This is called the Dow Jones/Gold ratio. The stock market is not in a strong position when the ratio goes down compared to gold. This is an excellent time to enter the market as gold strengthens. However, a rise in the ratio shows that gold is doing poorly against stocks.
- In the early months: From a historical perspective, the value of gold dips around January but steadily climbs as the year unfolds. It only makes sense when one enters the market when prices are low.
Trading on the TradingView app will give you broader insights into your possible decisions. This indirectly improves your trading outcomes.
What Investment Opportunities Are Open in the Gold Market?
You have two broad options. You can invest in its physical metal form, such as coins, bars, and jewelry, but this form of investment can incur security and insurance costs. Alternatively, you can invest in gold online. Here are popular options:
- Gold Spot Trading: This is more suitable for long-term investors. In this method, you buy and sell gold based on the current market price.
- Gold Futures: More suitable for short-term traders. They are commitments to buy or sell an asset at a particular time and price.
- Gold Options: Mainly for risk management opportunities. These give the client the right to buy or sell gold at a predetermined price but with no contract time limit.
- Gold Exchange Traded Funds (ETFs) and Contracts for Difference (CFDs): This is arguably the best way to invest in Gold. ETFs work as they do in the stock market, while CFDs allow you to speculate on gold without owning the physical asset.
Golden Opportunities Await
With significant geopolitical and economic uncertainties unfolding in 2024, the year is promising for gold investors. This is also emphasized by the recent bullish run of gold, which experts believe is about to continue. The bottom line is to understand the influencing factors from a general perspective, which will inform when to enter the market and exit for maximum profit or security.
