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Thursday, March 23, 2006

When is the best time to buy gold?

Many people ask when is the best time to buy gold as the price keeps changing, almost on an hourly basis. Currently the gold price is on an upward trend and

Sometimes there is a "trend" either upward or downward. You see on the news each day the price of gold fluctuating. Usually measured in terms of the US dollar per ounce.

But what is really happening here?

What does this really mean?

Gold Trends

The gold trend goes up and down in relation to the value of the dollar. The value of gold does not actually change very much at all. In fact if you checked back through history you would see that the value of gold over the past 200 years has hardly changed at all compared to the value of other goods. One ounce of gold today will purchase almost the same amount of goods as it did 50 years ago. The only change is actually the value of the currency not the gold. Inflation, recession (to use a popular word), all affect the value of the fiscal currency but generally do not affect gold.

The value of one ounce of gold, for example in the year 1800 was around $19-20US per ounce. These days it is in the 900 plus per ounce range, and rising. The large fluctuation as a direct result of the value of the decreasing.

The Value of Gold

A good example of the decrease in the value of the dollar, despite, or perhaps because of it, is the increase in the quantity of dollars being printed, According to the consumer price index What cost $20 in 1800 would cost 216.86 dollars in 2005. Also, if you were to buy exactly the same products in 2005 and 1800, they would cost you $20 and $1.85 cents respectively.

If the government decided top return to the gold standard and back every dollar by gold, there is so much printed dollars floating around now that it would take a good 50,000 dollars per ounce to ensure each dollar is backed by gold.

This could still happen and the government can still bring back the 1933 legislation to stop US citizens from owning gold if they wished. It would be very difficult to enforce and administer of course but there are other ways to do so. Buy back the gold using more printed money which becomes even of less value in terms of buying goods and services.

Michael Kosares, of USA Gold, notes the severe declining power of the US dollar in "Disturbing Trends".

And then, in stark contrast is the value of gold going up as the dollar goes down.


This explains why people purchase more gold during a recession when the value of the dollar (or whatever other fiscal currency they use) decreases in value. The value of the gold does not. Gold keeps it’s value and has done so for hundreds of years in fact.

When to Buy Gold
So what is the answer to the question. When is the best time to buy gold?

The best time to buy gold is right NOW! In fact it is always the best time to buy gold. If you were to purchase a small amount of gold bullion each month for the next 5 years, you would still beat inflation hands down.



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