When buying gold, a person will want to follow the general rule of investments: buy low and sell high. Depending on the economic climate and other factors, however, it can be hard to find gold at a low price. Despite this, there are many reasons that a person should buy gold, and these reasons shouldn't always be dictated by price. In addition to buying gold as an investment, many people buy gold in order to diversify their portfolios and as a hedge against future inflation.
Gold as an Investment and the Pricing of Gold
Although people have been known to buy gold and invest in precious metals throughout good economic times and bad, the price of gold tends to go up most during times of economic uncertainty. Similarly, when economic times are good, the price of gold tends to fall a bit. Although it's easy to say that a person should buy gold when economic times are good, there are many other factors that can influence the price of gold and can cause the price to not follow easily recognizable trends. Whether there is a looming currency crisis, rising national debt, government asset hoarding, inflation, war, or a long period of social unrest, having a spendable physical asset can help people sleep better at night.
Because there are several factors that can have an impact on the price of gold, the question isn't so much of when a person should buy gold, but instead it is a question of in which situations should a person buy gold.
When an Individual Should Buy Gold
Investors will want to avoid buying gold when the price is high for two reasons. The first reason is that it lets a person control a smaller amount of gold for the same amount of money. For instance, if the price of gold is $2,000 an ounce and someone has $10,000 that they're willing to invest in gold, they can buy five ounces of gold. However, if that person waited for gold to come down to $1,000 an ounce, that person could own twice as much gold for the same amount of money. However, as the price of gold can be extremely difficult to predict, an investor who is too cautious might spend several years waiting for the price to come to an acceptable level.
The second problem with buying gold at a high price is that there's a chance the investment can become devalued very quickly. Take the previous example. If someone bought $10,000 worth of gold at $2,000 an ounce and gold eventually dropped to $1,000 an ounce, that person is out $5,000.
A way to minimize this risk is to buy gold during specific times during the year for many consecutive years. By buying gold in this manner, an investor can average out the cost of the years in which gold is at a high price and the years in which gold is at a low price.
Investing in Gold When Young
In the world of investment, young people have the distinct advantage of having more time than old people to gain back heavy losses and to work more, earn more, and save more. Because of this, young people should feel confident in taking more calculated risks when investing. A good way that someone can take a calculated risk when investing in gold is to invest in gold mining companies rather than the physical asset.
Gold mining companies will basically track the price of gold as a higher price will allow them to earn more money. However, these companies aren't completely tethered to the price of gold, which means that if the price of gold goes up, the percentage of return an investor can make has the potential to be higher than the percentage that would have been earned by holding the physical asset. This can potentially make investing in gold mining stocks more lucrative than buying gold bullion. However, investing in gold mining stocks also runs the risk of the investment becoming completely worthless because the company can go bankrupt long before the price of gold hits zero.
It's a good idea to start investing in either gold mining company stocks or gold bullion while young. Not only will this allow a young person to accumulate a large position by the time he or she is ready to retire, but it will also likely create a reasonable average cost basis for the position.
Investing in Gold When Old
Older people will likely want to maintain their wealth and generally take fewer risks than younger people. In this case, investing in physical gold bullion is the way to go. The gains of gold aren't likely to outshine certain stock indices, but the losses gold might incur aren't likely to be that drastic either. Because gold in this case is being used as a storage of wealth and not necessarily as a growth investment, it isn't terribly important to time purchases based on specific price points.
Gold as Diversification
Gold is often bought by people as a way to diversify their portfolios. Whether a person is saving money for retirement or investing to grow or protect wealth, just about every investment plan should feature some physical assets. Buying gold is a great way to get exposure to a more tangible asset than stocks, and buying gold is also a good option for people who are overweight with stocks in their portfolios.
Gold as a Hedge Against Inflation
In simple terms, inflation occurs when prices rise in an economy. Inflation can be caused by many factors, but a devalued and declining currency is perhaps the most troubling. One of the main reasons that people buy gold is to guard against inflation. Not only can gold hold value better than paper money in some instances, but the price of gold will likely go up in the case of a falling currency. If a person is worried about impending inflation issues, he or she should be sure to stock up on gold bullion.
Tracking the Price of Gold
Because a person should usually buy a financial asset when it is relatively cheap, being able to track the price of gold is important. Luckily, this is easy to do. Gold is a heavily traded commodity, and many business and financial sites provide regular updates for the daily spot price of gold. These sites will also allow an investor to track the price over various time periods, including three-month periods, six-month periods, and the year-to-date period.
Finding Gold on eBay
It's easy to find gold bullion of all types when using eBay. Start by visiting the eBay homepage. By hovering the mouse over the Collectibles & Art category on the left side of the page, a person can select either the Coins & Paper Money link or the Gold & Silver Bullion Center link.
On the Coins & Paper Money page, a person can hover the mouse over the Bullion tab to select the subcategory Gold, or they can hover the mouse over Coins: US or Coins: World in order to select gold coins from either of these categories.
On the Gold & Silver Bullion Center page, a person can select the Gold Bars and Gold Coins options from the top of the page, use the quick search tools on the upper right side of the page, or refine results using the search tools on the left side of the page.
Buyers on eBay can use the search tools on the left side of the page to display results that are more specific. In addition to narrowing the results that are displayed to ones in a specific price range, buyers can also find sellers who offer free shipping, and they can also find sellers who are top-rated and are trusted by the larger eBay community. Shoppers can also use the search bar at the top of either page in order to search for specific keywords within the listings.
For shoppers who prefer to pay a fixed price for an item and who don't want to deal with the emotional roller coaster that auction listings can sometimes create, there are also tools that allow buyers to only view the listings that feature the Buy It Now instant purchase option.
Conclusion
It can be difficult to know when to buy gold. Much like the stock market, it is usually impossible to predict a bottom for the market, and so it might be a good idea for a person to buy gold at regular intervals if they decide to invest in gold for any reason. By buying at regular intervals, the price of gold can be averaged out between higher prices and lower prices. If investing over a long period of time, an averaged cost can help people realize decent returns.
Buying gold is a good idea for anyone who is serious about investing, who wants to gain a bit of physical financial security, and who wants to diversify a portfolio of asset holdings. Gold bullion can give people protection against large economic trends and issues as well. Although there are many places where a person can buy gold, buying gold on an online auction site like eBay can help customers buy and sell gold close to the actual spot price. Remember, it's almost always going to be better to hold the physical asset rather than a comparable paper asset.
