Gold hits record high; why 2024 might be the time to buy

On March 21st 2024, the price of gold price reached an unprecedented high of £1,734 per ounce. With the gold market reaching new heights, experts at The Gold Bullion Company have explained some of the reasons behind the surge as well as why 2024 is a great time to invest.

Reasons behind all-time high gold price:

 
1. Economic uncertainty
 
The demand for gold tends to surge massively during economic crises and recession as it’s seen as a safe-haven asset. With the devaluation of some of the world’s major currencies, investors have turned to gold as a defensive asset as a response to economic uncertainty.
 
2. Inflation
 
The World inflation rate for 2022 was 8.27%, a 4.8% increase from 2021. During an inflationary period for the economy, investors often opt for gold over cash due to its stability. This is because any devaluation of currencies resulting from inflation will increase the price of gold in that currency, so preserving the buying power of the investment. This increased demand for gold can also lead to an increase in its price and value.
 
3. Diversification
 
Investors look to diversify when there are disappointing performances in other asset classes. For example, when the stock market performs poorly, investors often use gold to diversify their portfolios as the price of gold often behaves differently to shares as gold is a finite resource.
 
4. Stability
 
Gold is viewed as a hedge against economic and political uncertainty, and while other asset classes fluctuate in value wildly during financial crises and recessions, gold retains its value over time. The past few years have seen a range of geopolitical conflicts arise leading to its upward price trajectory.

Gold also offers a type of investment insurance. Following 2022’s crypto crash, there was an increase in investors moving from digital assets like Bitcoin to physical assets like gold.
 
5. Retail purchases
 
Stronger gold prices are also driven by retail purchases of jewellery, bars and coins. Large countries, such as the US, India, and China, require and purchase a large amount of gold for jewellery production, making the price of gold rise.
 
6. Central bank gold-buying
 
Central banks, who have bought historic levels of gold since 2022, continue to be strong buyers in 2024. Gold’s performance in crises and its role as a long-term store of value are key reasons for central banks buying gold. This demand makes gold more valuable.
 
7. Production
 
Gold mining production has remained similar since 2016. This means the easy gold has already been mined, and miners now have to dig deeper to access quality gold reserves: increased challenges, dangers, costs and time needed to mine gold result in higher gold prices.
 
Rick Kanda, Managing Director at The Gold Bullion Company comments: “There have been a range of reasons for the all-time high gold prices, however, they nearly all come back to the fact that gold is a stable investment. Gold has historically been seen as a reliable store of value during economic and political uncertainty, making it unsurprising that a record number of investors backed gold in 2023.

“As demand increases, so does the value of gold making 2024 a great time to start investing. To help anyone interested in investing, we have shared our top tips on how to get started.”
 

How to invest in gold:

• Buy Gold coins

Gold coins are an increasingly important part of the average person’s gold investment plan. These offer a compromise between price and divisibility and liquidating them at gold buyers is relatively easy. Knowing the purity of your gold coin is very important as different coins can have different purities, meaning a lot of people often underestimate their worth.

In addition, UK coins, including gold sovereigns, half sovereigns and gold Britannia coins are Capital Gains Tax Free which makes them an appealing mid to long-term investment option. This means that when you sell these coins on you will not be taxed on your profits which cannot be said for other forms of gold such as bars and rounds or even overseas coins.
 

• Buy Gold bars

 
Despite coins being viewed as the obvious choice for first-time value, small and first-time investors should look into both coins and bars. Manufacturing costs for bars are generally lower than those for coins, resulting in lower purchase prices per gram for gold bars. This could help maximise your profits if you go on to sell at a later date.
 

• Keep on top of trends

 
Gold price information is so readily available it is worth keeping updated in case of any particularly low prices to invest more or extremely high rates to maybe sell on some of your investment to be able to reinvest.
 
You also need to keep up to date with world and financial news. While it can be difficult to predict when the price of gold is going to go up, you can help your research and decision-making by keeping a close eye on the latest news.
 

• Buying Assets With Gold Exposure

 
Of course, buying physical gold isn’t the only option. There are other ways you can invest in the metal without taking physical custody of it, but such arrangements carry counterparty risk which is eliminated for physical gold buyers in possession of physical bars or coins.
 
Gold Exchange-Traded Funds (ETFs) are a way of trading gold on the stock exchange. Buying and selling gold ETFs is usually quite easy as large numbers of buyers and sellers mean that the market clears relatively quickly for any given trade. However, to function, gold ETF fund managers must first buy physical gold and then store it in a vault and the value of the fund then mimics the spot price for the stored gold. This means the quality of gold ETFs depends on the prudence and ethics of the firms that manage them. Managers, for instance, may claim that their fund is “100%-backed by physical gold” but it may not be.
 
Pooled investments in gold are the same as gold ETFs except funds don’t trade on the open market. Instead, a fund manager purchases a quantity of gold and then sells tranches of it to investors. Investors then own the gold and hold certificates as proof.
 
Like ETFs, the success of a pooled gold investment scheme depends on the quality of the firm running it. Under these arrangements, investors don’t take direct ownership of physical gold. Instead, they trust a third party to allocate gold shares according to the quantity of the gold in the vault. Therefore, if you decide this strategy is right for you, you’ll want to make sure that third parties regularly audit the gold. You’ll also need to check that the company has sufficient security to protect the gold.
 
Rick Kanda says: “Investing in gold is exciting and rewarding, especially in 2024, but you need to ensure you are buying from reputable sellers. Ensure you only look at secure and verified sites and analyse independent customer reviews before making any purchase decisions.”