The best time to buy gold was about 40 years ago. The second best time to buy is now, more or less.
People buying stocks in gold mines will watch the ticker every waking hour the markets are open.
We are not buying for short-term gain, we are buying for longer-term security.
We are going to be less concerned about short-term fluctuations and more focused on buying at a reasonable price.
Our motivation is not to buy low and sell high, although if the timing works out that way, why not? Our motivation is to own gold and enjoy the enduring security it represents.
If you had a time machine you would want to travel back and buy your gold moments before Richard Nixon took the US off the Gold Standard on August 15, 1971. You could have bought an ounce of pure gold on the 14th for $35.
Today the price of an ounce of pure gold hovers around the $1,700 mark.
Without the benefits of a time machine, here are three layers of influence to consider.
1. Recognize that gold prices are on an upward trend.
At least, they have been so far. There must be a ceiling somewhere, but we are probably not there yet.
Recognizing this upward trend takes some of the stress out of buying gold. While there are ups and downs, the trend is up. So if you buy today at $1,700 and the price is $1,500 in a month, don’t kick yourself. The upward trend will likely recover that “loss”, and more.
Besides which, as mentioned, owning gold is not about a short-term “return on investment”.
Also, while looking at a chart of 24-hour or even 30-day price changes may give you palpitations, you can calm yourself by looking instead at a 5-year or 10-year chart. The ups and down even out and the upward trend, albeit bumpy, is revealed.
2. Watch for seasonal trends in buying and selling.
There are seasonal influences on gold prices, driven by factors like gift giving and summer vacations. India is the world’s largest buyer or gold and you’ll see an uptick in physical demand ahead of the Akshaya Tritya festival on April 27. Then in the middle of summers even gold dealers like to take time off and things can slow down.
But these are influences only, and can be overwhelmed by political and economic events. Just keep in mind that, all other things being equal, prices can dip a little during the summer. It can be a great time to buy.
3. Watch for bad news on Wall Street.
When a report comes out with a pessimistic outlook, some investors jump out of stocks and into gold. It’s a knee-jerk reaction. As a result gold prices may go up. This is not the best time to buy. More often than not, the price will settle again after a few days or perhaps weeks.
Of course, when there is a sudden spike, some doom-chasers will decide that this rise in prices will be the “big one” and they buy like crazy, expecting gold prices to hit $2,000 within days. Well, the big one is a myth perpetrated by people wanting to sell you more gold. Ignore these people.
Have a steady hand. Keep your emotions in check.
UPDATE, Aug 2011: The kind of bleak economic outlook we are seeing now, globally, goes beyond what I described above as a "pessimistic outlook". What we are seeing now is more than just bad news, it's the exposure of some fundamental weaknesses in the system, and it will likely be years before the US and many European countries can get back on their feet and sustain any real economic growth. As a result, we will likely continue to see gold prices rising for some time.
Be aware of the influences on prices, but at the same time keep an eye on the long-term trend. Buy when you can and time your buy during a dip in prices. Sometimes you’ll get it wrong. Don’t beat yourself up. This is about owning gold as a secure asset, not about making big bucks by the end of the week.
You can buy gold bullion coins and bars online at GovMint.com