The price of gold reached a six-year high on August 27, 2019, jumping to $1,542 (all figures US) an ounce. Gold’s value enjoyed a robust August in fact, broaching the $1,500 mark earlier in the month and inching up higher ever since. If there’s any time to consider selling your gold, it’s now.
What’s causing this value bump? The uncertainty over US-China trade talks is a key factor. Earlier this week, U.S. President Donald Trump threatened to hike duties on $250 billion in Chinese goods to 30% from 25% and boost tariffs on another $300 billion in products to 15% from 10%, in response to Chinese retaliation, as CNBC reports.
Gao Feng, spokesman for China’s Ministry of Commerce, commented: “China has plenty of means for countermeasures, but under the current situation, the question that should be discussed right now is about removing the U.S.’s new tariffs on $550 billion in Chinese goods to prevent escalation of the trade war.”
Gold has also got a boost as the US yield curve inversion intensified recently to levels not seen since 2007, scaring American markets.
Another factor is any movement by the U.S. Federal Reserve. The central bank cut its target rate by 25 basis points in July. As the Motley Fool writes, analysts are wondering if another cut is on the way before the end of the year. “Activity in the U.S. bond market suggests traders are anticipating more reductions in the coming months and through 2020,” the article states.
Gold often leverages support when interest rates are falling in the U.S., due to how lower rates decrease the opportunity cost of owning gold, which doesn’t give any yield. The more confident investors become that the Fed will continue to cut rates, the more likely it is that gold will extend its surging rally.
Also, other central banks play a role in gold’s impressive boom. As many central banks diversify their portfolio, they are bringing gold into the mix as global growth slows and trade and geopolitical tensions rise, LiveMint writes.
“Many analysts expect this trend to continue. Central-bank accumulation of gold ‘has further room to run,’ Deutsche Bank AG said in a report, as they gradually migrate reserve assets away from the dollar.”
Where gold prices can go
Could the price of gold even reach $1,800, say? It’s not unlikely, according to Forbes contributor Naeem Aslam. “The fact is that in the absence of a trade deal, the economic data will continue to deteriorate, global growth will slow, manufacturing data will continue to become worse and central banks will have no option but to support the markets with whatever they have.”
It’s important to take a step back and review the various ways in which gold prices tend to react to changes in the economy. For example, a lower dollar turns gold into a more attractive investment in other currencies. Also, a stronger dollar means that even if gold prices stay flat in dollar terms, gold gets more expensive in other currencies whose value has declined versus the dollar.
It should be noted that when the economy is strong, assets other than gold tend to outperform. Stocks rise in value, which makes the opportunity cost of owning gold and other commodities less appealing since they don’t generate any income. But as the economy softens, demand for stocks and other assets weakens, which drives money towards more stable investments such as cash and gold.
Many economic insiders saw this coming, such as Goldman Sachs. In a report published on November 26, 2018, Goldman Sachs wrote that commodities could climb 17% in the coming months and may escape a 2015-style price collapse. Goldman Sachs said, “Given the size of dislocations in commodity pricing relative to fundamentals with oil now having joined metals in pricing below cost support, we believe commodities offer an extremely attractive entry point for longs in oil, gold and base.”
So if you’re looking to sell your gold, you can find out more about getting a high rate of return for your gold jewellery or artifacts by visiting this section of Gold.to on selling gold for cash.
While gold soared to an impressive high this summer, the all-time high remains $1,895 an ounce, which it reached on September 5, 2011. The hike in value could be attributed to speculation surrounding an uneven recovery and volatility in the U.S. financial markets.
In that year, Federal Reserve Chairman Ben Bernanke said, “Well, I pay attention to the price of gold, but I think it reflects a lot of things. It reflects global uncertainties. The reason people hold gold is as a protection against what we call tail risk, really, really bad outcomes. And to the extent that the last few years have made people more worried about the potential of a major crisis, then they have gold as a protection.”
The gold bubble burst after 2011 for several reasons: gold exceeds when there is a risk of high inflation, as its popularity as a store of value increases. But, even though many central banks developed a very aggressive monetary policy (successive rounds of “quantitative easing” have doubled, or even tripled, the money supply in most advanced economies) global inflation was actually low and fell further.
Also, gold does not provide any income. As Slate writes in 2013, “Whereas equities have dividends, bonds have coupons, and homes provide rents, gold is solely a play on capital appreciation. Now that the global economy is recovering, other assets—equities or even revived real estate—thus provide higher returns. Indeed, U.S. and global equities have vastly outperformed gold since the sharp rise in gold prices in early 2009.”
Looking back, it’s no surprise then that by the 1980s, traders had bid the price of gold to $594 as a hedge against double-digit inflation, and he Fed ended inflation with double-digit interest rates but sparked a recession. Gold dipped to $410 per ounce and remained in that trading range until 1996 when it dropped to $288 per ounce in response to steady economic growth. Traders came back to gold after each economic crisis, such as the 9/11 terrorist attacks and the 2001 recession.
Chasing this year’s gold rally could be a wise move. Joe Foster, portfolio manager at the VanEck funds, told Yahoo Finance, “If a recession is on the horizon, then gold could hit new highs.”
The report went on to state: “Many advisers recommend as much as a 5% stake in gold, partly as insurance against financial catastrophe and partly as a portfolio diversifier. Gold typically does not move in tandem with stocks, which can improve your returns, adjusted for risk, over long periods of time.”
How high could gold go? George Milling-Stanley, Chief Gold Strategist at State Street Global Advisors, told Kitco News: “If you remember the last time we had significant speculative money coming into the market was as long ago as 2011, and speculative money flows drove the price up $500 in just 9 months. I could easily see something like that happening again.”
He added, in another interview: “I don’t think there’s a bad time to gain exposure to movements in the gold price provided one is in it for the long-term. Gold performs very, very well over the long-term. The lesson of thousands of years of history — that’s what it taught us.”
Gold could be a safe haven for investors. “Given the persistent nature of the US-China trade conflict, which has injected greater doses of recession fears into markets, the overall demand for safe haven assets is expected to remain resolute,” said Han Tan, market analyst at FXTM, a currency broker, according to CNN.
Citigroup is also bullish on the future of gold prices. “Equity markets continue to look vulnerable, especially given the deeper inversion of the U.S. yield curve,” Citigroup said. “Sometimes the ratio between asset classes is too hot. Sometimes too cold. But sometimes the chart signals ‘Just right’.”
This uptrend in gold prices could inspire many people to consider selling gold. Gold.to helps simplify the process of selling your gold and ensures that you get a fair and accurate payout. Companies such as Muzeum Gold and Silver Toronto and Toronto Gold are invaluable sources by advertising the prices that they pay online, offering transparency right from the beginning so you know what you can expect to receive from selling your gold or gold jewellery.
What you should do next
You might be wondering if holding onto your jewellery would be a wise move. As we wrote in this earlier blog post, generally, jewellery is anything but an investment. “That’s not to say that if you purchase jewellery some time ago, and it’s just lying around the house, unwanted, you shouldn’t think you will get a pretty penny for it. What you need to look out for is that you keep as big of a share of the penny as you can. That’s when the how to sell used jewellery question comes in.”
It’s also important to know your scales. After all, the weight of gold helps determine its value, but realize that jewellers use a different measurement standard called a Troy ounce. Scales will measure 28 grams per ounce, while gold is measured at 31.1 grams per Troy ounce. Some dealers may also use a system of weights called pennyweight (dwt) to track a Troy ounce, while others will use grams. Note that a pennyweight is the equivalent of 1.555 grams. Be alert that a dealer does not weigh your gold by pennyweight but pay you by the gram, which is a sneaky way for the dealer to pay you less for more weight of gold.
Another silver lining
Even though gold surged to a six-year high, silver also gained some attention in the Wall Street limelight. On August 30, silver topped out at a more than two-year high of $18.342 an ounce and it’s up around 11% month to date, with its yearly gain at roughly 18%.
“People are finally starting to believe that we are in a bull market in [precious] metals,” said James Hatzigiannis, senior strategist at Long Leaf Trading Group, told Marketwatch. “Silver is always known as a laggard to gold, and now you are seeing people getting into silver, and believing it’s a bull market.”
Many analysts posit that silver is riding on the coattails of the gold rally. Marketwatch goes on to report, “With a growing universe of negative interest rates, central banks debasing paper currencies, central banks accumulating gold, slowing global growth and trade war uncertainty, ‘gold has become [a] logical safe harbor for institutional investors,’ said Michael Armbruster, managing partner at Altavest.”
Another take on gold is that “everyone should own 10% of their money in gold,” according to CNBC analyst Jim Cramer in mid-August 2019.
Also, earlier that month the Motley Fool noted how valuable gold can be for investors: “Gold’s correlation with bonds over the past decade or so is roughly 0.25, still very low. So gold doesn’t track along with stocks, and it doesn’t track along with bonds, either. Adding a small amount of gold to a stock and bond portfolio — probably no more than 10% — can help increase diversification and the ultimate safety of the entire portfolio.”
Whether you have gold or silver jewellery/coins, you’ll want to get the best value for your items and that’s where Gold.to can help you, 24/7. Contact us if you want to get in touch with our precious-metals specialists to work with you on getting cash for your gold and silver.