Today the spot price of gold is $2,055 compared to August 2021, when it hit a record high of $2,051.
Is this the time to buy gold?
Is this the time to sit on the yellow coins, bars, and bullion collecting dust in your safe?
January 2022 commodity market experts reported that the international and domestic market for gold was down a bit and had dipped to $1835 per ounce. This dip presented an excellent opportunity to buy gold as an investment knowing that the price would rise at some point.
According to commodity market experts, the rise in the gold price can be attributed to three major happenings in the world.
First is the rising tension between Russia and Ukraine.
In late February 2022, the USA warned that Russian intended to invade Ukraine. It’s been all over the news. According to the Global Conflict Tracker, Russia launched a full-scale military invasion into Ukraine, resulting in tens of thousands of Ukrainians fleeing their country. The U.S. is offering support.
The United States ordered around three thousand U.S. military troops to deploy to Poland and Romania, NATO countries bordering Ukraine. Additionally, the USA sent Ukraine ammunition, small arms, and other defensive weaponry.
All of these events surrounding Russia and Ukraine have contributed to the increase in the price of gold. As the USA supports Ukraine and it’s in the news, the cost of gold will fluctuate.
Second is the U.S. Federal Interest Rate Hike
Since March 2020, the Fed has purchased $4.5 trillion in treasury bonds and mortgage-backed securities to stabilize the financial system and lower long-term rates for consumers and businesses. Treasury bonds are securities that pay a fixed interest rate every six months. Until they mature. Treasury bonds mature in more than a year but not more than ten years from their issue date.
Experts say that the U.S. Central Bank will raise interest rates this year to the most since 2005. January showed an ugly inflation number that will contribute to the rise in federal interest rates. According to Morgan Stanley, the federal interest rate will rise six times in 2022. Each quarter will most likely bring a change while the Federal Reserve lines up each interest rate hike. The gold markets will be impacted throughout the rest of the year.
What does this mean to consumers when the inflation rate is the highest since 1987? Changes in federal interest rates can positively and negatively affect markets. When interest rates are high, a bank loan will cost more.
Consumers must cut back on spending, and things like farm equipment, employees, etc., are reduced so businesses can watch their spending. Individuals and companies save because interest increases, money becomes less available, and spending decreases.
Third, major commodity prices are soaring, which fuels inflation.
Have you been to the grocery store or gas station lately? Oh my! Major commodity prices go up daily. Supply and demand are the keys. If the demand is greater than the inventory, then prices go up. Some factors contribute to pricing and inflation. These include income and population, the cost of production, and the actions of the government and producers.
Of course, weather, interest rates, and speculation also contribute. Consumers are more likely to approach spending with safety. They are slow to burn through reserves right now, anticipating a rise in interest rates, risks that may be on the horizon. A decrease in the services and resources available should price continue to go up during the rest of the year.
All this being said, the spot price of the precious gold bullion metal is high.
Uncertainty over the Russian-Ukraine war, the support of the USA in Poland and neighboring NATO countries, the federal interest rate, and the soaring cost of goods are driving the high price of gold. Gold has been a haven or hedge against inflation, volatility, or crisis.
Inflation and supply are tied together when considering gold. The supply of gold is relatively stable from year to year, but gold prices are also influenced by fear and uncertainty in the market this month and the rest of the year.
There is general concern amongst consumers with all the talk about inflation and the looming war in Russia and Ukraine. Chain bottlenecks and strong demand in vehicles and some commodities have caused upward pressure on inflation.
Inflation measures the rising prices of goods and services in an economy, and upward pressure leads to higher prices for necessities like food. The upward pressure has an impact on society and makes consumers scared.
Gold holds its value in weak economic environments. During the last year and now, investors are flocking to gold and silver bullion, gold stocks, and exchange-traded funds to protect their business and personal wealth. Rising prices are scaring investors who want to protect their money.
Gold and the U.S. Dollar
As the U.S. dollar rises in value, the value of gold falls. The same is true inversely. The strength of the U.S. dollar is related to interest rates. Gold may be far more efficient than cash as storing wealth. When you look at inflation, currency may lose value.
Gold is recognized as having a long-term record of stability, and investors are making it a part of their investments today.
What Determines the Spot Price of Gold and Why is it Called Spot Price?
With the situation abroad, gold is safe for investments, but it is not only bought as an investment; it is bought for other uses. The world consumption of new gold produced is about 10% in industry and technology, 40% in investments, and 50% in jewelry.
The most straightforward answer is the law of supply and demand.
When buyers buy gold, sellers will raise the price, and buyers will buy lower if sellers are flooding the market. The influences on the spot price are extensive and include jewelry demand, currency markets, inflation or deflation, investment demand, interest rates, risk aversion, geopolitics, and equity markets.
As stated above, when the geopolitical and economic situations are tense, gold prices go up. Currency markets are a driver in the spot gold price. As the dollar rises, it makes gold relatively more expensive for foreign buyers and can cause declines in the spot price. Inversely, gold prices rise as the dollar weakens, and gold is less costly for foreign investors.
Some sites have a gold and silver spot calculator to help investors, and Goldcalc.com is online and easy to use.
The spot price of gold is based on the purity of the gold. The spot price is based on 99.9% per gold. Gold coins and gold bullion are typically 24k gold. The spot price is called spot because it assumes the buyer will pay for the gold and have it delivered at a certain point in time, “on the spot.” It fluctuates with the market. Gold is bought in a troy ounce, and the calculator uses the weight of your gold in a troy ounce.
Did you know that the extraction cost for one troy ounce of gold is about $317 per troy ounce?
So, Where do you Buy Gold and Silver?
A new and exciting avenue has just opened. Idaho Pawn and Gold has offered excellent service to Meridian and Nampa, Idaho customers. Having a solid presence in the community, they are the go-to place when you need quick cash and want to have your transaction done safely and honestly.
Idaho Pawn and Gold is different than other pawn shops in the area. They have a team of experts who know precisely how to test precious metals using x-ray testing. If you want to sell your item, they will buy it outright. They typically offer 30-80% of the item’s value, which depends on the type of item, brand, and how fast the item will sell.
They pay top dollar for name-brand items in excellent working condition.
List of Common GOLD, JEWELRY, DIAMOND, OR PRECIOUS METALS:
Eagles Gold Coins
Krugerrands Gold Coin
Scrap, 90% Silver Coins
The process at Idaho Pawn and Gold is efficient, honest, transparent, and they pride themselves in their quality customer service.
Gold and Silver Buyers Club - Join the Exclusivity
The Gold & Silver Buyers Club at Idaho Pawn and Gold is new to the Treasure Valley. You can choose from the desired package in this exclusive monthly buyers club. On the first of each month, they will place an order for silver and/or gold to fulfill your subscription, and then on the 15th of the month, your investment will be delivered for you to pick up in the store.
This is a solid way to get precious metals with safety in mind. Having a routine to buy precious metals through the Club will help you focus on your investments as you reach the level of investments you need to feel secure.
You will need to plan ahead as incoming data surfaces, news reports what is happening abroad, and the economy changes each quarter. The Gold & Silver Buyers Club will put you a step ahead.
There are premiums on metals over spot prices that change daily and these will be decided at the time of the order. Because of the exclusivity of this Club you will get very comparable if not lower premiums on your gold than anywhere else online.
With the changes in the news, the desire to own the yellow stuff, gold for investment and as a hedge against inflation, the Gold & Silver Buyers Club is a great way to build your portfolio.