The bullion market offers investors some unique benefits compared to other assets. Gold is desirable for its durability and long-lasting value. The very wealthy often own gold as a means of transferring generational wealth. Though it provides no yields, it offers a level of security and reassurance that matters to the world’s richest people. When economic fears start to rise, they buy physical gold bullion as a way to preserve their wealth for better times, says Reuters.
However, in order to capitalize on these benefits, it helps if investors can get in on the gold market at a discount. Gold prices have historically risen when stock markets show high volatility and economic growth is uncertain. Buying a stake in bullion before those prices rise can make your portfolio even more resilient to financial fears.
If you’ve never purchased physical gold bullion before, bullion dealers are the most reliable way to obtain it. Dealers like Global Bullion Suppliers even offer free bullion consultations for beginner investors, where you can learn about the best types of products for achieving your investment goals.
Timing the market is no easy task, but a price slump compared to earlier performance is always a great opportunity. Here’s what’s happening in the bullion market that could make now a great time to get into gold.
Interest Rates Are Rising Rapidly
You may often hear that gold is an inflation hedge. Data shows that this bears out in the longterm. Gold is proven to maintain its purchasing power over decades and even centuries; it’s more complicated in the shortterm.
As a result of rapid inflation, central banks around the world are raising interest rates rapidly. Their goal is to make borrowing money more expensive, thereby curtailing the money supply being brought into the economy and reducing overall spending.
While rising interest rates make it more expensive to borrow money, it also becomes more lucrative to lend money, which is what investors do when they buy bonds. Like gold, bonds are seen as safe assets that lend themselves to a defensive investment strategy. Unlike gold, bonds produce yields, and as those yields rise, bonds become more competitive, according to CNN.
That’s led to a decrease in gold prices that gives prospective bullion buyers an opportunity to get into the market.
Growth Continues Despite Recession Fears
Unemployment continues to fall as economic growth continues, despite the near-certainty of a recession coming in the next couple of years. Strong economic growth usually means investors aren’t worried too much and have less impetus to put their wealth into gold.
However, high inflation means that central banks around the world actively want to drive down spending. Monetary policy is focused on bringing about a recession – albeit one that is as mild as possible – in order to curtail rising prices.
Strong U.S. Dollar
The U.S. dollar has been thriving recently, soaring against the euro and renminbi. It’s another symptom of U.S. monetary policy and rapid interest hikes, and it has the side effect of taking some of the steam out of gold. In many ways, gold is seen as an “alternative currency” due to its former role in the monetary system. Like competing currencies, a strong dollar often means weaker gold.
While the market could move in any direction, there are strong signs that now is a great time to get into gold.
Last Updated: November 3, 2022
