Gold hits another record high – too late to buy in?
Gold prices hit a fresh high of US$3,700 this week as investors eye Fed rate cuts.
Every time I see another headline about gold hitting a record high, I ask myself the same question: Should I be buying some, or is it too late?
It's tempting. After all, gold has been on a tear for well over a year before hitting a new high this week of over US$3,700 (~AU$5,500). It follows a 30% price rise this year alone.
I may have found my answer this week after re-discovering an old folder on my phone.
Back in 2020, I'd downloaded a no-frills gold app (Rush Gold if interested) and tossed in a small sum when prices were also hitting new highs.
When I finally logged back in this week, my little stash that once showed $650 now read $1,266. It had simply doubled without me touching it, despite buying in at the "peak".
Why is gold up?
The current environment has created a situation where it's hard for gold to lose.
Typically gold has an inverse relationship with interest rates. When cash rates go up, the price of gold normally drops, and vice versa.
But high inflation, economic uncertainty and ongoing conflicts saw the price of gold continuing to go up over 2022-2024, despite real rates rising.
With the Fed expected to cut rates next week, gold is seeing yet another reason to spike.
At this point, it seems like a win-win for gold.
How do you buy in?
If you're interested in investing in gold you have a few main options.
You can buy physical gold, invest in gold ETFs or buy gold stocks.
Buying physical gold is the most direct route but you're faced with where to store it. Keeping it under the bed is risky and keeping it in a vault will incur storage and insurance costs.
Gold ETFs are the easier option because you can buy them on any regular share trading platform and then add funds or withdraw with the click of a button.
You will need to pay a brokerage fee for every transaction and a small management fee (usually around 0.5% annually) is detracted within the ETF.
Gold stocks are riskier because you're investing in a gold mining company rather than simply gold itself. Gold stock prices normally correlate to the price of gold but can be far more volatile depending on the company's operations.
Just remember: Nobody know what the market will do next. Like any investment, you could lose money if the value of your asset drops. That's why it's always important to weigh your risk profile and diversify your investments.
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