An incredibly treasured precious metal, a safe haven, and a hedge against inflation, it comes as no surprise that gold is one of the most admired metals by people all over the world. However, a question that is often asked by people who are thinking of putting their money somewhere is whether or not this is the right time to buy gold.

After all, the timing of your buying can greatly affect the profit or the saving value you might make from your gold purchase. However, unlike most other assets, gold has a long-standing value. The challenge is buying at the best price because even if you get a good price right now, it’s possible that you may have gotten a better price at a future date.

Simply put, it’s usually advisable that you buy gold when at a relatively low point to ensure high profitability. However, there are some exceptions to that rule, and we will discuss those in light of the dynamics of how gold works. 

What are the Factors that Affect Gold Prices?

Compared to other assets, gold tends to maintain its value and its prices may move higher or lower according to global political and economic events. Gold is a store of value and an asset that generates a capital gain over the long term. When buying gold, you will have to take into account the current global political scenario as well as future forecasts issued by reputable institutions and experts.

Bottom line, before you decide to purchase the yellow metal, here’s what you need to know about the factors that affect its price.

1. Geopolitics

Gold’s history clearly indicates a relationship between gold prices and geopolitical factors. Heightened geopolitical tensions often bring a subsequent increase in the demand for gold by businesses and countries as they attempt to protect themselves by acquiring safe-haven assets like gold.

During global economic uncertainty, as seen during the pandemic, for instance, central bank reserves turn to gold to diversify their monetary reserves. Recently, it was also reported that Central banks bought 180 tons of gold in the second quarter of 2022, lifting the first-half net purchases to 270 tons, according to the World Gold Council.

2. Supply and Demand

Gold is a commodity that is basically obtained through mining and trading, and thus, the supply of gold is not always abundant. Countering a rise in demand for the yellow metal by increasing production is not just challenging but almost impossible, especially in a short time span. Thus, as is the case with every commodity there is, when the demand for gold rises, so do prices.

3. Performance of Alternative Assets

Overall, the performance of alternative asset classes also affects the demand and price of gold. For instance, when the stock market is performing well, people move away from gold to invest in stocks and other investment options with higher profitability, and vice versa.

Why Gold is the Ever-After Safe Haven?

It’s important to bear in mind that gold is a long-term saving asset. While all other investment assets may suffer or collapse in times of market turbulence, gold stands tall, as the yellow metal is to which investors usually flock to store the value of their savings. That is why gold is simply known as a safe haven.

One famous example of such a situation is the Covid-19 pandemic, which we experienced more than two years ago. Amid the pandemic, gold prices have seen an unprecedented hike in the history of the metal. In fact, prices hit more than $2,000 an ounce in August 2020. As stock market volatility and global uncertainty prevail along with the global trade war between the United States and China, the demand for gold as a safe-haven investment asset also grows.

Since we’re still reeling from the aftereffects of a pandemic, we can expect another major hike in gold prices, especially as
China’s zero-COVID policy, which has led to long lockdowns in major cities and suspended operations in factories and businesses, is still creating supply chain chaos. IMF Managing Director Kristalina Georgieva warned that a prolonged slowdown in China would have substantial global spillovers.

Ever since the pandemic and with the supply chain disruptions, the Ukraine war, and elevated inflation, corporate investors, retailers, business owners, and individuals have shown more interest in acquiring gold. According to experts, gold prices will continue to rise or stay high as long as there are high global geopolitical concerns and stagflation risks.

Then, What is the Right Time to Buy Gold?

In short, the best time to buy gold is right now.  A safe haven in uncertain, tumultuous times, gold is an all-time attractive saving asset.

If you want to make the best out of the fluctuating prices, we suggest you keep an eye on gold’s price to identify the best time to buy. For a more informed strategy, we also advise dedicating a monthly or a quarterly amount of your income to buying gold. In such a case, you will be investing in the gold’s annual average price, rather than chasing the highest vs lowest point.

Make sure you keep an eye out for all the factors mentioned above, especially geopolitical factors such as the Ukraine war and high inflation be well aware of what’s happening in the global market and what has brought the fall in gold prices. You may want to read reports by analysts before you decide to put your money in gold, especially if you do not have holding power.

Dedicate between 10-20% of your overall portfolio to safe-haven assets like gold, as it is a stable store of value, is ideal for long-term saving purposes, and helps hedge against inflation and minimize losses from other riskier investments such as stocks. A fall in the stock market performance brings a subsequent rise in the price of gold, thereby helping in mitigating losses.

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