For the duration of the past decade, gold has usually been a less volatile investment than global equities, other commodities and real estate, amongst other investments. As a result of this there is not an overriding amount of concern about when is the right time to buy in the market (the same goes for palladium and platinum). However prices do vary on a day-to-day basis, making it a good idea to track prices on the Internet, as well as the websites of brokers, to see if you can take advantage of any drop.
In comparison with gold, silver is a more volatile investment, and as the two metals are independent of each other in their movements, silver could be considered to diversify and hedge your portfolio. As a direct result of its volatility, silver has increased in price faster than gold, but it also decreases quickly too, meaning it is important to consider this when deciding to buy silver.
The Go-To Commodity
Gold has somewhat always been a famous ‘safe haven’ investment during depressed economic times. In the present moment, when a recession is being predicted for the forthcoming years and the world’s major currencies are inflating as central banks print more and more money, the general attitude towards investing in bullion looks positive; gold purchases have increased by 1600% over the last 12 months.
Around 37% of gold is now recycled rather than freshly mined, with the discovery of new gold reserves shrinking year on year. Production of gold is now static, with output reportedly having peaked in 2003. Platinum is in huge demand and very rare, with 80% deriving solely from South Africa. Palladium, which is used in cars and pharmaceutical products around the world, is 15 times more scarce than gold. Living in a world where the demand for precious metals is rising, the market should continue to look favourable for investors.
With all of this in mind, it is possible to focus too much on the short-term performance figures of precious metal commodities. No one worth their salt in the market suggests placing the majority of your savings into bullion; recent data recommends between 5 and 10% of your overall portfolio should be bullion.
The Longer-Term Picture
So what does the future hold for the precious metals market? China and India hold 50% of the world’s gold and other emerging markets are increasing their purchases in line with their rapid growth. By 2030 it is forecast that China and India alone will be responsible for 40% of the world’s middle-class purchases.
The trends showing that more gold will be held purely for investment purposes. Currently around 50% of the world’s in-circulation gold is jewellery, with only 19% in the form of an investment. In 2011 new acquisition gold was only 44% jewellery, while 36% went to private investors; we can only expect this trend to keep swinging away from jewellery and towards investors.
To summarise then, rather than asking when is a good time to invest, you should look more at when is it not a good time to invest. All fiat currencies, currencies that are not linked to the value of gold, have lost value since their inception, and with governments printing evermore bank notes for the purposes of quantitative easing, precious metals offer a true store of value.
Author Bio: Jamie is an experienced investor and writes precious metal articles on behalf of BullionRock.