Is now the right time to buy gold?

Is it time to buy gold from Caraor?

There is no answer to this question. If, however, you don't have enough gold, then now is the time to buy some. Gold has been mined by human beings since time immemorial. First it was used to make ornaments, then to serve religious cults, and since time immemorial gold has been used as a currency of exchange. So, no matter when you buy your gold, it will remain a precious metal: its characteristics give it the status of "king of metals".

As you can see, it's always a good idea to own gold. However, a professional can help you determine the best time to buy, according to your needs.

 

What indicators should I look out for when buying gold?

Here is a non-exhaustive list of parameters that can influence the price of investment gold.

 

1. Interest rates

You've probably already noticed that money deposited in a savings account doesn't earn you much any more. Worse still, if you deduct interest, bank charges, etc., you realize that it costs money to entrust your money to a bank! As a result, many savers may be tempted to use their savings rather than leave them in the bank.

Of course, you can spend it. However, if you don't want to spend your savings, what can you do with them? Well, some savers prefer to buy gold rather than pay fees to their bank... So when interest rates are low, gold tends to rise.

What does it mean when interest rates are low? Quite simply, it means that money is losing its value. Indeed, if getting money doesn't cost you much anymore, it's because its value is falling. In the extreme, when Germany manages to borrow money on the markets at negative rates, this means that we're paying Germany to borrow! It's easy to see why, under these conditions, many people prefer to hold gold rather than euros.

 

2. Covid crisis and concerns

This question is worthy of a blog post of its own... We can't ignore the current crisis, let alone the ECB's response to it. Here too, it could have an impact on the price of gold.

In addition to the worrying health situation in which we find ourselves on a daily basis since the emergence of this virus, it has had a profound impact on our economic model. Indeed, we have had to change our behavior, and many economic agents have been directly impacted economically. In concrete terms, money stopped flowing into certain sectors, and to avoid impacting the economy as a whole, the central banks of many countries decided to print large quantities of new banknotes. This means that the money supply, i.e. the number of banknotes in circulation, has increased considerably, so that "everyone" has more banknotes to buy the same thing, creating inflation. Against this backdrop, gold naturally increases in value.

 

3. The European BRRD directive

Not all Europeans know this yet, but since this European Directive was transposed into national law, if a bank were to fail, your assets would only be guaranteed up to 100,000 euros. In practice, this means that the surplus could be used to pay off your bank's debts and insolvency. This is a very important point, because many households and companies have more than 100,000 euros in their account, and may not necessarily want to spend the surplus... And so, quite naturally, some households are led to buy investment gold to protect themselves in the event of a system failure.

 

4. International tensions

As you're no doubt aware, gold is a safe-haven asset. This means that the greater the uncertainty, the greater the number of people looking to buy it as a hedge against systemic shocks. The Sino-American trade war and tensions between North Korea and the USA have all played their part in gold's rise. The ongoing crisis in the Middle East, tensions between Paris and Ankara and the global pandemic are all events that increase the risks and the need to take "refuge" in investment gold.

 

5. US / Euros exchange rate

We often forget, or rather don't think about it, but all commodity prices are expressed in $, and since we use the euro on a daily basis, exchange rate fluctuations have an effect on the price of gold. The stronger the euro is against the greenback, the cheaper gold will be. Conversely, the stronger the dollar, the more expensive it will be to buy gold. In other words, all things being equal, it's better to buy gold when the dollar is weak, and sell gold when the dollar is strong against the euro.

 

Conclusion

Nobody knows what the future holds, but given what's been said, it's easy to understand why gold is "so expensive". On the other hand, nobody knows whether the problems we're currently experiencing will last. So it's important for you to ask yourself: is now the right time to invest in gold?

We can't answer your questions for you, but at Caraor we're here to advise and guide you in the purchase of your investment gold, whether in coin or bullion form.