You may already know that the best time to find great deals on grills and patio furniture is at the end of summer, and that the best new car deals can be had at the end of the year, but what about when to buy gold bullion coins? Understanding how precious metals prices move isn't as simple as understanding patio furniture or car prices. There's also more to consider than the just the price when timing your gold purchase. Read on to learn more about potential economic signs you should keep an eye out for when buying gold bullion coins, signs that could help you purchase at an optimal time.
What are gold bullion coins?
First things first: what are gold bullion coins? The simplest definition of “bullion” is “precious metals in bulk form,” with the price of bullion coins being tied directly to the commodities market. Gold bullion comes in a variety of different weights to meet your financial needs, from 1/10 oz. coins to 1 kilo bars. These coins can be more optimal for a short-term holding strategy than certified coins, as they tend to behave more like commodities. A few of the most popular gold bullion coins include Gold American Eagle Coins, Gold American Buffalo Coins, and Canadian Gold Maple Leaf Coins.
When should you consider buying gold bullion coins?
#1: During periods of market stress
Market stress includes periods of economic upheaval, like September 11, U.S. recessions, and debt crises. Market stress can come at any time and in any degree of severity. Gold's strength in the face of economic pressure is likely one of its best known characteristics and why it's often referred to as a “safe haven asset.” A November 2016 report from the World Gold Council points out that “as a high-quality, liquid asset, gold performs especially well during times of systemic crisis, helping [holders of gold] preserve capital. One reason gold is especially effective during times of stress is its historically low correlation with most financial assets, making it very effective at diversifying a portfolio.”
Stay informed and be wary of economic events going on around the world. As easy as they are to buy and sell, gold bullion coins are a highly liquid asset and can provide an advantageous means of wealth protection during periods of market stress.
#2: When central banks are buying gold
Gold has long been an important reserve asset. Beginning in 2010, writes Forbes, central banks around the world switched from being net sellers of gold to net buyers of gold. “In 2015 alone, central banks collectively added 483 tons—the second largest annual total since the end of the gold standard—with Russia and China accounting for most of the activity.”
In fact, there's “plenty of evidence to support a ‘follow the central bankers' theory when it comes to gold,” says business journalist Tim Treadgold. In his opinion, “if a big [holder] in any market is a net buyer, then the trend is more likely to be up than down and in gold there is no bigger force than the world's central banks.”
But why do central banks have such an insatiable interest in gold? “The primary driver of central banks' gold buying continues to be diversification away from the U.S. dollar with some also looking for a hedge against currency volatility more generally,” reports the World Gold Council via Business Insider. Given that gold is historically negatively correlated with the U.S. dollar (the main asset held by central banks around the world), gold can act as a hedge against future dollar weakness. Though governments and individuals may have different reasons for being attracted to gold, both stand to benefit from a healthy allocation of physical gold.
“For more than two millennia, gold has had virtually unquestioned acceptance as payment,” says Alan Greenspan, Former Federal Reserve Chairman. Take steps towards gold ownership and a healthier financial future with U.S. Money Reserve’s exclusive Gold Information Kit. It includes special offers, diversification strategies, and a precious metals guidebook. Sign up now to gain access to this one-of-a-kind tool!
#3: When the market is quiet
There's a widely known saying that the best time to buy gold is when everything is quiet. Depending on your financial goals and budget, you may be able to buy a higher volume of gold bullion coins during a period of time when the gold market is receiving little attention. Gold prices could be lower and the type and variety of gold bullion coins available for purchase may be greater, giving you an opportunity to buy a higher volume and a wider variety of gold.
#4: When the dollar shows signs of weakness
“The value of the dollar against other currencies is important because gold is priced in dollars all over the world,” writes Philip N. Diehl, President of U.S. Money Reserve. “When the dollar is weak, gold is cheaper to purchase in other currencies,” especially the currencies of countries where consumers have deep cultural ties to gold, like China and India. As the middle classes in both countries expands (and central banks continue buying gold), the relationship between the dollar and gold stands to become an ever more important factor in driving demand. A slumping dollar could signal an uptick in gold prices.
#5: When interest rates are moving
Another potential signal for higher gold prices are changes in interest rates. Again, Diehl shares his expertise. “Lower interest rates reduce returns from high-quality (low-risk) bonds and other assets that compete with gold,” says Diehl. “When interest rates approach zero, or go negative as they are now doing in some economies, money flows from bonds into gold, raising gold prices.” From a diversification perspective, “gold carries no duration risk” and is not negatively impacted by monetary policies and interventions, adds the World Gold Council, as it's neither an official currency nor backed by official currencies.
What's duration risk? Duration risk is the type of risk economists associate with the sensitivity of a bond's price to a one percent change in interest rates. The longer a bond's duration, the greater its sensitivity to interest rate changes.
#6: When you're ready
When is truly the best time to buy gold bullion coins? When you're ready. You could be reevaluating your retirement goals, examining your portfolio allocations, or looking for a thoughtful gift for a family member. According to research from the World Gold Council, since 1997 “the average annual return on gold, in U.S. dollar terms, has consistently outperformed average returns on U.S. Treasuries, Eurobonds, Japanese government bonds, and U.K. gilts over 10-year, 5-year, and 1-year time horizons.” Whether it's today, tomorrow, or one year from now, the right time to buy gold is when you're ready. Call 1-844-307-1589 to speak with a knowledgeable Account Executive today. Your Account Executive can provide you with a one-on-one consultation to help you learn more about safeguarding your wealth.