There is obviously a lot of market instability right now. The collapse in the stock market caused by the spread of coronavirus on a pandemic, global level is going to have some very real and very significant effects on people’s savings. While precious metals like gold and silver are not as volatile even during these situations as the general stock market, gold prices have also certainly taken a hit over the last couple weeks.
Not even gold and silver can be reliable hedges against a financial crisis, despite what many people tell you. In fact, during a crisis situation, salable assets like precious metals are frequently sold so the investor can get some liquid cash. We saw this happen during the 2008 financial crisis, when gold fell 31 percent as the crisis accelerated, and people rushed to move to cash. There were a lot of bulls who lost money because they didn’t realize a credit crisis caused assets—all assets—to plunge.
However, this also created a unique, strong buying opportunity when prices sank to their low marks, and the team at our pawn shop in Olathe, KS believes the current situation may present a similar opportunity.
The time to buy is at the bottom
It is important to note that during a time of crisis, cash in currency form is the most desirable asset to hold. However, the actions of central banks during times of crisis also make gold a fantastic investment. From its low point in 2008 up through late 2011, gold was on a strong bull market.
We’ve seen this over and over, and not just with gold. Timing is everything with investing, whether it’s in stocks or precious metals. If you get in while prices are low, you stand to gain much more than you would if you get in while prices are high. And if you allow the market to ride out over the course of decades, you’ll generally experience much more growth than decline.
Before this global pandemic, there had been a lot of expectations that gold would continue to grow solidly for the better part of the next decade. For now, there’s not really any reason to believe gold isn’t going to get back on a long-term growth trajectory as the pandemic gets resolved and the markets stabilize. The hardest part about predicting that is that we don’t know how long it will take for the pandemic to be resolved, of course.
So, what does all of this mean?
If you’ve been considering investing in precious metals, pay close attention to the prices of gold and silver over the coming weeks, and keep reading gold investing news sources. Timing is everything, and it’s important to make sure you time your investment at a point when the market isn’t going to get much lower than it is at your time of purchase.
If you’re interested in more tips about precious metal investing, or how you can use gold to add to your investment portfolio, we encourage you to contact Harrison Street Pawn with any questions you have for our pawn shop in Olathe, KS.