Gold pushed through the US$2,000 per ounce mark in late October, and there are indications it could move higher this year.
Investors now find themselves in a world where the yellow metal is near all-time highs and spent a few days above the previously rare US$2,000 price point. Is gold too expensive to buy, or is US$2,000 a cheap price point given its future potential?
Read on to learn what strategies experts recommend when the price of gold is above US$2,000.
Why is the gold price rising?
He said the same thing happened when gold reached US$1,000 over a decade ago.
However, Greg Taylor, chief investment officer at Purpose Investments, pointed out that while US$2,000 is seen as a “magic number” for investors in North America, the metal has already been breaking records in international currencies.
Taylor said the run in gold comes amid concerns about the broader health of the financial markets.
“I think this is kind of an inflation story,” he said, noting that a segment of the investor class is growing frustrated with the tactics used by central banks, like excessive money printing and stimulus events.
“But it’s also bordering on people with questions about the health of the financial system, and just the amount of money printing and looking for assets that are not subject to the whims of central bankers,” he said.
Should investors buy gold at US$2,000?
Investors are often told to buy low and sell high, but the current situation is tricky — gold is close to its highest price ever, but many market watchers believe its run has only gotten started.
“A high price may or may not necessarily be an impediment for someone who’s making a strategic allocation to gold,” he explained. ‘The price point is important, but also more important than that is how does (gold) behave when things are moving in the future, and how is that going to add to your overall portfolio of return.’
For his part, James Henry Anderson, senior market analyst at SD Bullion, said he recommends buying gold in tranches. This approach of dollar cost averaging is a way to avoid overspending at any one point. “Ultimately you want to kind of ease your way into it, but also not buy in such small volumes that you’re paying a huge (amount in) premiums,” he said.
He also encouraged investors to plan their strategy surrounding bullion with a long-term view. “If I was simply going to take a fifth of my liquid net worth and move it into bullion, I wouldn’t do it all in one move, I would do it in multiple tranches and I would take my time. I would do it in maybe five tranches, let’s say over a half year’s time roughly,” he said.
Jeff Clark, metals and mining analyst at TheGoldAdvisor.com, said those buying gold as an investment should be clear on their strategy for the commodity and understand what role they want it to play in their portfolio. “You’re not buying it as an investment, hoping it goes up… you’re buying it as insurance, as portfolio protection,” he said.
“Even as a tactical person, you’re never going to buy the bottom or sell at the top,” he said. “Nobody can do that.”
How high will the gold price go in 2023?
Experts and investors alike see gold’s price rise as a market-altering event, but there’s no clear answer on whether US$2,000 is truly the metal’s new reality or if it’s merely a blip in the grand scheme of things.
Anderson said he’s taking a five to 10 year approach because in that time span “US$2,000 an ounce gold is going to be looked at as US$250 an ounce gold — it’s going to be looked at as real value, not a bad play.”
For his part, Doug Casey of InternationalMan.com argued that when it comes to stability and future-proofing investments, gold will always beat out currency risks, interest risks, default risks and other stock market concerns.
“Stocks are still overpriced,’ he asserted.
“Overall, if you’re at the end of the Fed hiking cycle (which I believe we are), and if there is the potential for the Fed to start reversing some of those hikes next year (which I believe there is), it is a more bullish environment for gold,” Larson.
Investor takeaway
As gold stabilizes around US$2,000, it’s clear investors may need to adjust their ideas on what constitutes a high price.
With the yellow metal perhaps poised to move much higher, market participants will have to be ready to position themselves advantageously in the new paradigm for gold.
Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.