Is Gold the Trade of the Century?
Is gold now ready to make its best entrance for 2021 and the 21st century? Many would argue that achievement has already happened. Since 2013 gold has enjoyed an incredible run-up in value, and since 2000 it has moved from approximately $350 USD to $1,750 a Troy ounce currently. That gain overtime of $1,400 USD per ounce has been an incredible run, all of it occurring after the Millennium in the new century. Today, gold sits in a holding pattern since the end of 2020 that will determine whether it goes through a significant correction or drives higher with increased demand for the rest of the year. Given that stock markets and other avenues of investment are becoming saturated and ripe for corrections, as well as significant political changes having just occurred in major countries worldwide, gold may again be used as a hedge against potential losses elsewhere.
Bad News for Equities is Good News for Gold Investors
Gold has traditionally shown an inverse relationship with equities prices. As a result, a number of market watchers insist 2021 may be a good time to own gold as equities might be headed lower in the months to come. Economists far and wide believe stocks could face a bear market at some point in 2021. Though some investors will swoop in and buy on the dip, those dollars can only last for so long. At some point, selling will give way to even more selling in a cascade effect. It is also certainly possible the global economy will be in a bear market as a related reaction when that cascade kicks in. And when the market dips down in such a scenario, gold and other precious metals can increase in value surprisingly quick. Investors have frequently favored gold, silver, and other precious metals as these investments are comparably stable when recessions and economic pullbacks occur.
Pricing of Retail Gold Investments and Market Prices
Remember, there is a huge difference in practice when comparing the spot market price of gold versus what people actually buy it for. Due to a variety of reasons ranging from overhead and profit-making to costs of operation and shipping, the cost of gold for a consumer can be higher than what is reflected for the same 24-carat quality on the market board.
The quality of the gold involved can also be very different in practical value versus the spot price as well. For instance, if someone is holding a coin or bar that is made from 22-carat gold versus 24-carat purity, then the actual value of that gold is going to be less than the same amount in quantity priced at the spot market level. The confusion created by both of these scenarios comes up again and again as people hope to buy or sell gold at different assumed levels and then get surprised repeatedly by the actual value that shows up in the transaction itself. As long as folks don’t pay detailed attention to differences and their mathematical adjustments, gold prices are going to seem skewed versus what people see in reality with their personal gold.
Think of the quoted spot gold price as a benchmark or securities markets trading price for buyers, sellers, and investors. Only large banks located in London or New York could possibly buy gold at the quoted spot price. And even at the spot price, the bank would have extra expenses like hiring an armored car to pick up the purchased gold and pay for some place to store the bullion bars.
The point is that there are extra expenses involved in the process to go from the spot price to the point of having a gold coin or bullion available for sale at a dealer’s location. Expenses such as testing, minting, transport, and storage must be added to the value of the gold sitting in the vault at your local bullion dealer. Also, like every type of investment, the company selling you the gold must add a little commission or mark-up to cover their expenses.
The good news for you as a gold buyer is that the gold dealer business is very competitive. A dealer knows that you have choices of where to buy what are essentially the same products – gold coins and bars. As a result, the price mark-up you pay to buy gold should be relatively minor compared to the spot price you find on the Internet. If the difference is huge, especially when buying, then you should be looking elsewhere. Otherwise, you’re just giving away money for free in your gold purchase.
Instead, use the published gold spot price to see how the value of your gold is changing in both the long term and short time frames. If you look at how much the price has changed over longer periods of time compared to the little extra you pay to buy physical gold, you can see that there are large profits to be made for the investor that understands how things work.
Investing in Gold & More Volatility
One thing that gold buyers and sellers should keep in mind, however, with 2021 after afterward involves how much volatility will be occurring in the gold market going forward, and it’s not necessarily from realistic supply and demand. The GameStop incident at the end of 2020 as well as the recent silver run-up showed how fast price changes can be implemented in market pricing with speculation and digital trading orders. When a large number of otherwise separate ordering points start moving in concern, significant price changes can happen in a very short period of time, oftentimes shocking observers who are otherwise used to fluctuations happening at a slower pace.
Before the gold bullion, ETFs were introduced – the SPDR Gold Shares started trading in November 2004 – investors only had a choice of investing in physical gold or in the shares of gold mining companies. For the investor who wanted to work through his brokerage account, the gold miner stocks were the only game in town. Today, investors can easily put in orders and make changes on the fly through stock market smartphone apps that are far more powerful than desktop programs and websites from just five years ago. To see how powerful this was in action, one simply needs to look at the GameStop scenario again which had a majority of its buy orders submitted through phone apps versus other digital brokerage tools. That increased the number of investors as well as the scale of volume considerably, all of it being handled lightning-fast with Internet-connected technology. Anyone who thinks that gold markets going forward, and their pricing, are going to continue in a plodding fashion is in for a very rough surprise in the next few years. Gold may seem like it's floundering right now, but tomorrow it could spike with little notice.
Stability During Rough Times
Fortunately, MyGold provides a welcome safe harbor for gold buyers in New Zealand. Not only does MyGold keep extensive track of what is going on with gold pricing as it moves, sales with MyGold are locked in as soon as a buyer makes a financial commitment on an amount. There is no float or surprise adjustment period days later or because gold pricing was “in transit” at the time and needed to be “settled” first. When buyers work with MyGold they have full gold pricing transparency and what was ordered is what is paid without unseen changes coming into play. It’s because of this reason among many that MyGold continues to be one of the premier go-to sources for gold buying in New Zealand year after year, regardless of how gold prices change over time.