Gold Price Behavior—News & Updates.
Overview: Stocks & Investment
Historically, gold has been a highly valued commodity that continues to hold value today. Gold has moved beyond just being a currency or used in jewelry. The rare yellow metal has found new purposes in electronics and medical devices.
Investors buy either physical gold—such as gold bullion—or paper stock forms in times of economic downturn. This is because gold has historically been valued highly, and there are no signs of that changing.
Although gold prices hit some low and high points over the last year, it’s still a valuable commodity for investors. You’ll see how holding onto a gold investment, even when things look down, can help shield you from the effects of economic uncertainty.
Let’s take a look at gold’s price behavior and why gold is still a great investment.
Today’s Gold Price Behavior
As you know, the COVID-19 pandemic created a year of economic turmoil for investors and noninvestors alike. The virus shut down several industries, bringing economies around the world to a standstill.
As the pandemic continued, investors flocked to gold as a safe haven amongst the turmoil. This caused gold to reach a high point of $2,067 per ounce in August of 2020.
Fortunately for people but unfortunately for the price of gold, breakthrough vaccines provided new hope for economic reopenings.
Since businesses are getting back on their feet, investors have slowed down their gold buying as they anticipate things heading back to normal. For this reason, the price of gold has slipped.
The price of gold fell hard in February 2021, hitting its lowest price since 2016.
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Why Now’s Still a Good Time To Invest in Gold
If the price of gold just hit a low point and today’s economic outlook is far better than a year ago, why should you still invest in gold?
There are two great reasons you should still invest in gold, despite today’s gold price behavior. One is connected to the value of the US dollar, and the other is about future protection.
Dropping Value of USD
As economic recovery efforts continue, analysts expect the value of the US dollar (USD) to drop.
When the value of a currency like the USD—which hasn’t been backed by gold since the 1970s—is under threat, investors buy gold in anticipation.
The weakening of the USD may worry consumers in the US and foreign companies that rely on US consumer demand.
Protection Against the Unpredictable
Despite the gradual reopening of economies, no one knows when things will be back to 100% normal.
While the vaccines have been proven to be effective, COVID-19 has yet to be eradicated and has mutated into different strains.
The CDC has already reported a new strain of the virus in the US, which could make reopening more difficult.
In other words, the world has been taking steps toward recovery, but one slip-up can send us a few steps back.
Whether from a virus or financial collapse, gold investments can help prepare you for future economic shutdowns.
Investing in physical gold or gold in the form of paper stocks can help shield you from the effects of hard financial times.
Gold’s historic value as a commodity continues to be useful beyond currency and jewelry.
Ways of Investing in Gold
So, where should you start?
As mentioned before, there are several ways to invest in gold, such as buying physical gold or paper stocks. Here’s a breakdown of ways you can start investing.
Gold Mining Stocks
Gold mining stocks represent a share in gold mining companies. They’re similar to other stock investments in that they’re a liquid investment purchasable on a stock exchange.
When you invest in a gold mining company stock, you’ve essentially invested in that company. If that company were to go bankrupt, your stock would reflect that company and not the actual price of gold.
Always research the company you buy stock from. It could save you from an obvious mistake.
A gold exchange-traded fund (ETF) is similar to other ETFs in that it’s a fund that trades on a stock exchange. Gold ETFs are specific to various companies that mine for gold.
Gold ETFs help you diversify your portfolio by spreading risk across several different companies that deal with gold. However, ETFs still link to financial markets, meaning they’re subject to market fluctuations.
If the markets dip, you may not be able to sell your interest.
Once one of the popular forms of investing in gold, gold certificates’ popularity hit a rut when the yellow metal no longer backed the dollar.
Although gold certificates are not technically stocks, they’re official papers indicating your gold ownership.
However, this does not mean that you officially possess gold. If the certified company that’s tied to your investment goes under, your gold certificate may become worthless. So tread carefully here.
Many investors turn to physical gold, sometimes in the form of coins, because they’re relatively easy to acquire.
Owning gold gives investors a sense of satisfaction and security. There are also significant upsides to possessing it, such as its high liquidity.
In other words, investing in physical gold, not just collecting coins, allows you to sell it quickly or hold onto it for a rainy day, or year.
Where Can You Learn More About Investing
Before you dive into any investment, whether it’s gold, copper, or some other commodity, make sure you’re well-read on it. Join Dear Retail to stay up-to-date with the latest stock market news. We’re a community of like-minded investors seeking to educate and advocate for the smallcap market. Start your journey to becoming a smart investor with us.
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