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MoneyWatch: Managing Your Money
By Matt Richardson
Edited By Angelica Leicht
/ CBS News
The price of gold hit a record high earlier this month, hitting $2,160 per ounce. But then, it broke the record again, rising to $2,204.04 on March 20, according to American Hartford Gold. This comes as gold has made record gains in the last year, partially thanks to a renewed interest in investing in the precious metal. Gold can be a major help for investors looking for protection against inflation and a safe way to diversify their portfolio.
Like all investments, however, the timing needs to be right for the return to be worth it.
Against this backdrop, then, many are wondering if they should buy gold now, even at today's current price, or if they should wait for it to drop down again. While the answer to this question is specific to the investor, there is a compelling case to be made to buy gold now. Below, we'll break down three reasons why you may not want to wait for the price of gold to fall.
Considering a gold investment now? Explore your top options here today.
Should you wait for the price of gold to drop before buying?
Here are three reasons why investors may not want to wait to invest in gold.
There's no guarantee that the price will drop
Waiting for the price of gold to fall sounds ideal, in theory, but there's no guarantee that the price will drop anytime soon. Based on recent trends, gold's value may only increase short term. So, while today's price of $2,167.58 per ounce (as of March 25) may seem elevated, it could prove to be beneficial when stacked against a $2,300 cost per ounce in the months or years to come.
And remember that gold is less of an income-producing investment and more useful as a portfolio protector, anyway, so buying in (or selling) simply based on the price at any given time is generally not advisable as the only consideration.
Learn more about the price of gold here now.
You'll miss out on inflation protection while waiting
Even if you wait for the price of gold to drop — and it does — you'll miss out on vital inflation protection that gold provides in the interim. And, based on the latest Bureau of Labor Statistics report, inflation is still a concern. It rose in February and remains more than a full point above the Federal Reserve's target 2% goal.
With this understanding, it makes sense to invest in gold now to hedge against inflation by adding an asset whose value tends to remain steady while inflation erodes the purchasing power of the dollar.
You may be able to make a quick profit
Gold is not and should not generally be considered an income-producing asset in the same way that stocks, bonds and others can be. It is, as stated, better as a portfolio diversifier and hedge against inflation. But that doesn't mean that you can't make a profit from gold by buying it at a low price and selling it at a higher one.
While this can generally take years to materialize, the price of gold has broken records multiple times over the last few years. With this understanding, you may be able to make a relatively quicker profit by buying the yellow metal now versus doing so in a different economic climate.
The bottom line
Waiting for an investment price to change favorably is always risky but is arguably more so for alternative assets like gold. And although the price of the precious metal has risen significantly in the past few years, it still may make sense to buy now. After all, there's no guarantee that it will stop rising and, even if it falls, you'll lose vital inflation protection in the interim. Plus, with prices increasing as they have been, this may be a rare opportunity to earn some income from an asset historically better known as a portfolio diversification and inflation protector. For all of these reasons, it may make sense to invest in gold even now. As is the case with all investments, however, you should thoroughly consider all options before buying gold to improve your chances of earning substantive returns.
Matt Richardson
Matt Richardson is the managing editor for the Managing Your Money section for CBSNews.com. He writes and edits content about personal finance ranging from savings to investing to insurance.
