Is this the right time to buy gold?
This is a common question that many people will pose to me if this is the right time to buy gold since stocks are doing well. As I have mentioned in my previous two articles that all investors should have some gold in their portfolios as gold is a wealth magnet that will attract other forms of wealth into your lives.
Gold performs well whenever there is a crisis such as wars, recessions etc because investors will dump equities and flee to safer assets that will preserve their wealth. Gold is one such vehicle which serves this function perfectly well. And guess what happen when people start rushing top buy gold? The simple laws of demand and supply will come in where gold’s price simply has to multiply several folds to satisfy the raging demands. It is hard to imagine now with gold’s price stuck in the range of USD 600 ++ range per ounce. It is boring right now because people are not interested in the lump of gold which pays no interest and lying in vaults in their banks. Gold is still sleeping now but for how long can this situation last?
The common fear is what if gold price drops after you purchase your gold? Why should we fear when a limited resource of earth starts to get cheaper? My answer will be to buy regularly or to borrow a term from the fund industry, dollar cost averaging. In fact, buying regularly will be an ideal situation if you want to ride out the volatility in gold price. Do not worry too much and buy when gold price is cheap. I cannot forecast how high gold prices will move up to but I am very certain that your descendants will never see such prices again. The reason is very simple – inflation. Inflation will erode your purchasing power over the years and gold performs well whenever inflation occurs.
Do not hesitate too long as you can see that as 2006 is drawing to an end, gold prices is creeping up. Gold will rule again very soon and you will not be surprised to see many investors returning to this asset class once again. Of course, you can wait and watch this chance of a lifetime slips by. For the sale of your financial freedom, invest time to understand gold and start accumulating today. In my next article, I will show you how to value certain gold coins which are selling below their intrinsic value.
