In the year 2024, gold prices experienced a significant spike. Learn the strategies to capitalize on this gold market boom.
Gold prices have smashed record after record, surging over 30% in 2024 and reaching an unprecedented high of $2,748.23 this week.
The Federal Reserve's unexpected 0.5% interest rate reduction, geopolitical stress and economic instability surrounding the US presidential election have paved the way for these skyrocketing prices. The surge has been further fueled by the central banks of China, India, and Turkey reducing their reliance on the US dollar, along with retail giant Costco stocking 1-ounce bullion bars.
According to Joseph Cavatoni, senior market strategist for the World Gold Council, "Costco offering gold makes it just as easy for a retail investor to buy gold as it is for them to purchase household essentials." He adds, "Buying gold has never been more straightforward and convenient."
This year, gold, often seen as a safeguard against inflation, has been shining bright. However, investors considering joining the gold rush should be aware of various factors.
Why Invest in Gold?
In times of uncertainty, traders often flock to gold, betting that it will maintain its value better than other assets such as stocks, bonds, and currencies if an economy sinks.
During the 2008-2012 period, the value of gold increased significantly, as indicated by the 101.1% increase in the Producer Price Index (PPI) for gold, as reported by the Bureau of Labor Statistics.
"Gold performs well in scenarios of risk. If you look at market downturns or systemic events in the market, that's when gold truly shines," said Cavatoni.
How to Buy Gold?
For a novice gold buyer, Cavatoni suggests beginning by identifying your reason for investing in gold, whether it's to diversify your portfolio or for safe-haven purposes.
Once you've established your objective, you must decide whether to invest through financial tools such as gold-backed exchange-traded funds or by purchasing it physically.
Both options come with their advantages and disadvantages. For instance, when it comes to physical gold, factors like delivery, storage, and protection should be considered.
Another factor to think about when purchasing gold in the retail market is the difference between the sticker price of the bullion and the spot price of gold.
"It's essential to be comfortable with the price level – ensuring you're buying the investment you want and not being offered something a bit more collectible," Cavatoni advises.
When it comes to buying options, options range from banks to reputable brick-and-mortar and online retailers. However, Cavatoni urges adopting a "round-trip mentality" when purchasing physical gold, emphasizing the importance of the selling stage as much as the purchasing process.
"When it comes time to holding it for as long as you'd like and selling it, make sure you have a trusted partner that you can return to and make the sale," he suggests.
Other factors to take into account are the gold's purity and the form it takes. Products like gold jewelry might command higher premiums based on design and artistic value, introducing more complicated aspects.
On the other hand, gold-backed ETFs provide consumers with freedom from the considerations that come with purchasing physical gold.
"It's as simple as buying a stock," Cavatoni said. "You can do that commission-free on a lot of platforms these days, so it's relatively cheap to buy and sell."
But as with any investment, Cavatoni advises being cautious and doing your due diligence before investing in gold, regardless of the form, above all else.
"If something seems too good to be true, then it might not be true. Be mindful before making the investment," he warns. "You don't need to rush into owning gold."
The surge in gold prices has attracted businesses to invest in gold-backed products, seeing it as a potential opportunity for profit. In light of the increasingness of retailers like Costco offering 1-ounce bullion bars, buying gold has become more accessible and convenient for businesses.
The success of some businesses in the 2008-2012 period, as indicated by the significant increase in the Producer Price Index (PPI) for gold, also shows the potential benefits of investing in gold during uncertain economic times.
