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Category: Campfire

Around the campfire: Timing the market

When's a good time to buy gold? It's a question on many minds at the moment, with the price languishing about $258 an ounce (£274) from its peak of o...

29 April 2021

Jason Cozens

When’s a good time to buy gold? It’s a question on many minds at the moment, with the price languishing about $258 an ounce (£274) from its peak of over $2000 per oz last August.

There’s no simple answer. The obvious response is “buy it when it’s cheap and use it when it’s expensive”. But that’s not useful; none of us has a crystal ball to peer into the future. Quite obviously no-one who may have bought their gold at last year’s peak wants to spend it now, and crystallise those ‘losses’.

Maybe ‘experts’ know something you or I don’t? According to the latest Reuters poll of 42 gold analysts and traders, the consensus is for a median (i.e. mid-point) gold price of $1,784 an ounce for 2021 and $1,743 for 2022. But just three months ago the same analysts were forecasting $1,925 and $1,908 an ounce for 2021 and 2022 respectively. What has changed so fundamentally in the past three months? “Most of the drivers (of the rally) are fading”, said one of those polled.

Really? Analysts are like sheep – they don’t like deviating from the herd. They also like to hedge their bets. So Reuters also reported that “interest in gold could be rekindled by events such as a weakening of the US dollar, an inflation surge, falling stock markets or a wave of coronavirus infections big enough to derail economic growth”.

These analysts don’t seem to be taking much notice of the inflation that’s already here, in everything from the price of beach huts in Essex, England (being snapped up at an 80% higher price than this time last year, according to one renter) to basic foodstuffs. The international price of soybeans – China is the world’s biggest soybean buyer, mostly for animal feed; it bought 100 million tonnes of soybeans in 2020 – has gone up by more than 70% since this time last year. Other basic commodities have also increased in cost astronomically.

If you believe, as I do, that the supply of fiat currency – paper money – in the financial system correlates to inflation, then we could be in for a strong inflationary shock later this year. Money supply – M2 in the jargon – is growing at around 27%, the fastest rate ever. The latest US consumer price index (CPI) data from the US showed prices rising by an annualised 2.6% in March – the highest since August 2018. But house prices are not captured by the CPI – and they rose by 17% in March; almost half of homes are getting sold within a week of listing. Officially everything is under control; unofficially I have my doubts. Official inflation figures do not reflect what’s really happening.

Does this give you a clue as to when it is a good time to buy gold? Trust the ‘experts'(who can evidently turn on a dime) or trust your own experience? However you play it, gold remains an inflationary defence par excellence.

Getting the timing right is virtually impossible – it’s probably wiser to follow the trend. Let’s suppose that you bought gold months before that July/August 2020 peak. Had you bought gold on 9 March 2020 for example – when a major dip happened – then you would now be sitting on a ‘gain’ of $281 an ounce. If you had bought gold when Glint was still an infant, say towards the end of November 2016, your ‘gain’ would by now have been more than $1,600.

For me, and all of us at Glint, gold is money, and it should and can, be used as money – it’s your gold and it can be spent or saved as you wish. As the financial system in the US and elsewhere is flooded with paper money and cryptocurrencies remain incredibly volatile, for me any time is a good time to buy gold.

Until next week,

Jason Cozens, CEO and Founder

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