When Should You Buy Gold? It’s Not Complicated
Determining When to Buy Gold – It’s Not Complicated
I’ve been in the business of helping people acquire precious metals for nearly 15 years now. Early in my career part of my job was monitoring sales calls for auditing purposes; essentially ensuring sales professionals provided the level of service expected of them by the company. I’ve monitored thousands of calls and have had the opportunity to listen to the reasons why customers wait to get involved in the market. From that time in my career until today, the spot price of gold has risen over 80%. Today I reflect on the reasons people hesitated during those monitored calls and think of all the missed gold investment opportunities.
Likely the most prominent reason prospective gold buyers didn’t move forward with their acquisition is they would tend to overcomplicate the timing of making their purchase. They couldn’t stomach the possibility of purchasing their gold and then seeing even a minor pull back on spot price following their purchase. So, they would dive into various reports seeking analysts’ opinions on the perfect moment to buy, only to delay their purchase further, or get confused and give up altogether. Here is an example of the kind of commentary that throws people into what I consider “analysis paralysis:”
“To take this relative movement into account, we look instead at how much gold has deviated from its 200-day moving average (200DMA). The recent rally has pushed gold’s price three standard deviations (3σ) above the long-term average spread of its 200DMA. Most recently, we saw this extreme divergence during the COVID-19 pandemic in 2020 when gold crossed US$2,000/oz and again around the time gold reached US$2,500/oz. Following these moves there was a period of consolidation before the upward trend eventually resumed.”
Here is another:
“From a technical and positioning standpoint, if gold were to remain above US$3,000/oz over the next couple of weeks, it would likely trigger additional buying from derivatives contracts. For example, we estimate there is roughly US$8bn in net delta-adjusted notional in options contracts from US gold ETFs that expire Friday 21 March,4 and US$16bn in options on futures that expire on 26 March. While this may create a slingshot effect, it could also trigger short-term-profit taking.”
Now, I’m sure this analyst is very smart and possesses some impressive educational credentials to support the analyses, but for the average gold buyer purchasing for the same fundamental reasons people have bought gold for centuries, this information can be more confusing than helpful.
Listen, if you are purchasing very large quantities of gold with the purpose of selling quickly with a hope and prayer of making a quick profit (think day trader mentality), this type of information could be helpful. But for the gold buyer who is purchasing physical gold to leverage benefits historically realized over the long run, this information simply creates analysis paralysis that leads to missed physical gold buying opportunities that have historically provided long run benefits. The buyer seeking the long-term benefits of gold buys their coins and bars and puts their investment away for a rainy day knowing they have a store of wealth that is largely an uncorrected asset that they have as their own, stored securely and discretely, for when they need it most.
Don’t fall into the trap of analysis paralysis and miss an opportunity to hold a world class physical asset that has stood the test of time.
As a side note, here is real-life story recently encountered. A friend of my 88-year-old dad recently applied for Medicaid. The process requires his friend to reveal his income and assets so that the state can determine his eligibility for Medicaid benefits. If his assets exceed a certain amount, he must “spend down” his assets to be legible for benefits to care for his wife who has Alzheimer’s. His IRA account, savings and checking account, and real estate are all on the table as a measurable asset. Physical gold is an asset that isn’t tied to a banking institution, brokerage account, or public record. Hypothetically, had he purchased gold decades ago, it could serve as a discreet and valuable form of wealth protection—an untraceable asset outside the prying eyes of government bureaucracy.
When considering your gold purchase, the key is to focus on why you are buying gold—not the short-term market noise. Gold is a safeguard, a hedge against uncertainty, and a timeless store of value. Are you waiting for the “perfect moment?” The moment could be now.