When is a good time to invest in gold? In what situations is the price of gold likely to drop?

Question

When is a good time to invest in gold?

What are situations likely to trigger a drop in gold prices?

What are alternatives to gold?

Answer 1

A good time to invest in gold WAS about ten years ago, when it had reached a 20-year bottom around $300 an ounce. That's when I was buying (gold stocks, not physical gold).

Since then, it's gone up 5-6 times in ten years. It might continue to go up of course, but it also has long way down to go, because it has come up "too far, too fast." I have since sold my gold stocks.

Alternatives to gold include other metals such as silver and copper (which actually belong in the same chemical family) as well as platinum and palladium. But they, too, have run up a lot in price over the past ten years.

Answer 2

Gold is a good investment when central bank money printers can’t take their thumbs off the print button.

Over the last 3 years the US Federal Reserve printed a ton of dollars to bail out banks and to purchase US federal debt.

Maybe I should exchange my dollars for euros?

The European Central Bank (ECB) is following the FED plan and printing money to buy Greek, Italian, and now Spanish bonds. This, indirectly, is a bailout of French and German banks.

Maybe I should exchange my euros for yen?

The Bank Of Japan (Japan’s central bank) is determined not to let the yen rise against other currencies so they too are printing money to keep the yen weak.

Maybe I should exchange my yen for swiss francs?

The Swiss National Bank (Switzerland’s central bank) is also determined not to let the franc rise against other currencies so they too are printing money.

You quickly begin to realize that your options are dwindling for places to put your money where the government central bank isn’t working hard to dilute your savings.

Physical gold is also a good investment for several other situations:

1. When you own a gold coin you own an asset with zero liability. You are independent of any third party (central bank, investment bank, retail bank, etc.) for the value of your asset as well as access to your asset.
2. Gold is harder to trace. When the criminal class (i.e. government) comes looking for money to steal, money in bank and retirement accounts is easily identified and accessible by government. Physical gold, kept in one’s possession, is much harder to confiscate. The government’s criminal behavior becomes much more obvious if they raid homes looking for gold. The Chinese in the picture below were rushing to the bank in an attempt to withdraw their gold before the newly elected communist government got their hands on it. Many did not succeed.

What situations would lead to a drop in gold prices?

1. No more money printing by central banks. This would dramatically increase interest rates.
2. End of the monopoly on money issued by central banks. The free market does not choose fiat paper money for a medium of exchange.

What are the alternatives?
Silver has traditionally been used more as money than gold. Silver is usually used for day-to-day purchases while gold is used for savings.

Answer 3

Always a good time to buy gold. Think less in terms of commodities, more in terms of true money that can not be inflated out of existence.

Buy it as cheap as you can, hold it for as long as possible.

The historical graphs never lie and it proves time and time again its a good store of value.

I would never think of it in terms of a speculative bet though. If it does reward you, its because the global currency system is broken. I think its broken, it may reward you. But never expect it to reward you. In the short term (2-3 years), the gold price can be manipulated. In the long term (10 years) less so.