Gold prices have outpaced the S&P 500 so far this year
The price of gold has been on a tear lately. Actually, the precious metal has rallied for most of 2024.
In January, gold sold for about 2,000 an ounce. Last week, the price of gold hit $2,734 an ounce, increasing by one-third in 10 months. Its even grown faster than the S&P 500.
So, whats behind the rally? Analysts point out its largely a case of supply and demand. There is a limited supply of gold. In recent months, central banks around the world have been purchasing more gold. The reason isnt exactly clear but the purchases could be a hedge against geopolitical tensions and economic uncertainty.
Some investors have also jumped on the bandwagon, once they identified the trend. Some may also seek a hedge for the same reason central banks are.
Is it too late to get in on the rally? Predictions are mixed, but it should be pointed out that the price of gold can be volatile. It can go down just as quickly as it goes up.
In an interview with ConsumerAffairs early this year, Robert Johnson, professor of finance at Creighton University, pointed out that in normal times, gold does not appreciate as fast as stocks.
While having a small position in precious metals may dampen portfolio volatility in the short-run, the tradeoff between slightly dampened volatility and the lost long-term return is certainly not a prudent one, particularly for Gen Z and millennials with long investing time horizons, he said.
Buying and selling gold
While gold exchange-traded funds (ETF) provide an easy way to gain gold exposure, many investors prefer to own physical gold, even though it is less liquid. When it comes time to sell, Patrick Yip, senior director of Business Development at APMEX, says investors have to do some homework.
If selling to a company, ask yourself a few of the following questions, Yip said in a recent ConsumerAffairs interview.
Do you trust the company? How many years have they been in business? How big are they and how much in sales volume do they do? What do their online reviews say? If selling to a reputable dealer, youll likely get a fair price when its time to liquidate your precious metals.
Buying and selling gold can be more complex that investing in stocks and bonds. The ConsumerAffairs research team analyzed 25 gold dealers and picked the five best.
Photo Credit: Consumer Affairs News Department Images
Posted: 2024-10-28 00:04:52