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Against the background of high inflation And as the ensuing high interest rates cushion that, many investors buy money. Rising demand for gold investments contributed to the rise in gold investments. metal priceswhen the money reaches Best ever As of April 10th, it was over $2,350 per ounce.
Given this recent high, many people who decided to invest in gold and made a profit may be wondering whether they should sell their gold investment or wait for future events to prompt them to sell. not. So when is the best time to sell your gold investment? Here's what you need to know.
Discover today's most popular gold investment options.
When should you sell your gold investment?
The answer to this question will depend on your circumstances, including your desire to diversify your portfolio and your outlook on different asset classes, but some possible scenarios for deciding to sell your gold investments include:
When inflation cools down
Gold is being considered inflation hedge, you may be encouraged to sell your gold investments if you think inflation has already eased or will ease soon. This is especially true if you have increased your gold allocation relative to other assets due to recent circumstances.
“Gold was in demand as an investment during times of high inflation and political instability,” said David Kass, a clinical finance professor at the University of Maryland.
With gold prices hitting new highs and inflation rates in the U.S. and abroad falling near the 2% target level, now is the time for investors to reduce their stake in the precious metal and take advantage of profits. “It seems like a good time to get back to normal asset allocation,” he added.
Explore how gold can add value to your investment portfolio today.
When economic uncertainty decreases
In relation to normalizing inflation, you may decide to sell your gold investments if: economic situation It will be more stable or positive in the future.
“If the underlying uncertainty is significantly reduced, the demand for gold, and therefore the price of gold, is likely to decline thereafter,” said Peter C. Earle, senior economist at the National Bureau of Economic Research. .
“If the emergency situation subsides, or if a dubious outlook for economic growth suddenly turns brighter, for example, an uncertain future inflation situation may change to suggest price stability in the short term,” he said. If that happens, the price of gold could suddenly fall.” I would add.
When the value of gold deviates too much from other precious metals
meanwhile value of gold Although it does not exactly track the value of other precious metals such as silver, there is often a correlation between them. And if things are too out of sync, you might consider selling gold.
the current, gold and silver ratioBased on the price of gold divided by the price of silver, the value is approximately 88, which has historically averaged in the mid-to-high 60s, indicating that gold may be overvalued relative to silver. ” explains Rohan Reddy. Research Director of Global X ETF.
However, it is important to remember that a high ratio does not automatically mean whether gold is overvalued or not, as other factors may be present. However, low prices for other precious metals can be a sign of economic problems.
“The sources of demand for other precious metals such as silver, platinum and palladium are heavily influenced by other industrial uses, and their relative price performance can be indicative of other factors in the global economy.” he says.
When gold prices don't follow fundamentals
Investment prices may be based on fundamental factors, that is, factors that indicate the fair value of an asset, or they may be based on technical factors, such as a market rally indicating an increase in price.
In the case of gold, fundamentals can include factors such as bond yields. Gold prices often rise because investors would rather have predictable returns that way than higher bond yields. guess the price of gold.
Therefore, if gold moves too far away from fundamentals, that could be a reason to sell investing in your gold.
“Gold performed surprisingly well in 2023 despite historically unfavorable market conditions for the asset class. Despite slower inflation and more competitive real yields, gold “We thought it would have lasting value despite the historical correlation that it should have worked if we had done it,” Reddy says. .
“We have seen much of the recent rally driven by technical factors, primarily due to buying by global central banks to diversify foreign exchange reserves. In theory, there is a limit to this buying. Investors may consider selling while gold prices are rising,” he added.
conclusion
These different scenarios may result in some investors selling some or all of their gold investments, but these are not hard and fast rules to follow. Much of this decision will depend on your circumstances, such as your investment objectives, time horizon, and risk tolerance, as well as your outlook on the value of gold relative to other assets.And just because gold hits all-time highs doesn't mean it can't continue increase in value.
