Is It a Good Time to Buy Gold?
Posted on February 09, 2023
Entry points, entry points... Why is it that an asset with centuries of doing exactly what it's supposed to still suffers from the search for entry points? And really, is there any point in buying gold unless you can pile bars on by the kilo? Let's take a look at two investors on what can rightly be called the opposite sides of the spectrum.
Exhibit 1: The student's 10-gram gold bar, bought this year
We believe that stories such as this aren't advertised enough. A 20-year old went into a store and asked for a 10-gram bar. Our webshop would have saved her the walk, but...
Either way, she wasn't deterred by the talk of the last few weeks over how gold, around $1,930, might be ready for a correction. While she says she's familiar with economics, she might not know gold sat above its most famous ATH, that of 2011. From a perspective, she was buying high and might experience short-term losses.
And, with roughly a third of an ounce, she also wasn't deterred by profiles of some gold investors who own hundreds of tons of gold. Which brings us to...
Exhibit 2: The central banks' record gold purchases, bought last year
While the ATH from 2011 might be gold's most popular one, it's not actually the highest point. That would be last year, when gold hit $2,070. And when did central banks buy the most gold in a year since 1967? Also last year.
For all we have to say about their money management, central banks are actually plenty careful with money, so long as it's theirs. While buying high might be attributed to a rookie mistake when done by novice investors, it can't exactly be called that when done by the biggest investors in gold.
Central banks either aren't particularly concerned with entry points or they believe gold is heading up soon. If we had to guess, we'd say it's a bit of both.
When it comes to gold investment, there's no time like the present
That's a bold statement, for sure. What about when gold was true currency? What about when it was semi-currency due to the U.S. dollar tether? Well, in each of those instances, buying now was the right decision "then". But since you can't buy then, the only option you're left with is buying now or waiting for a future dip.
Gold isn't a speculative investment. It's not a Google stock in the early 2000s. You aren't buying it to quadruple in price in a decade with a clause that the company might implode. Gold is rarely about entry points, unless you're buying by the ton. And even then, it hasn't escaped our attention that central banks have been buyers for thirteen consecutive years.
But since price is what everyone cares about, anyway... In 2004, when Google launched its famously-appreciating stock, gold was trading just above $400. Not bad for a supposedly no-yield asset. And despite the premium that incremental gold has, and despite the correction gold has had over the past week, how is that student faring? Having paid $625 for the 10-gram gold bar, she is already and still in the plus.
"Living in the now" might seem like some New Age slogan, but it very much applies to gold investment. Which is remarkable considering its nature. When you weigh the chance of gold dipping briefly against the chance of gold having a 1990s run, the deciding factor probably ends up being inventory availability. And while we'd like to guarantee nothing will ever go out of stock in our inventory, that's one of the few guarantees about gold we aren't comfortable making.
Photo by xb100 on Freepik
