When to Buy Gold and Silver

Your investment goals influence how you approach timing. Short-term investors seek quick gains, while long-term investors aim for steady, gradual growth over time.

Let’s explore the two most significant factors impacting gold and silver prices: economic conditions and geopolitical events.

Economic Conditions

Generally, demand for precious metals rises in poor economic times and falls when the economy is strong. This is not absolute, but it typically holds true, especially during inflationary periods. When inflation rises, people often turn to gold and silver to preserve their net worth, as fiat currency loses purchasing power.

High inflation and high precious metals prices frequently coincide. Similarly, interest rates affect gold and silver prices inversely: high rates encourage cash investments, while lower rates often prompt investors to seek stability in precious metals.

Geopolitical Events

Geopolitical instability—wars, unrest, policy changes, or election outcomes—also impacts precious metals prices. Conflict or civil unrest can disrupt the production and export of gold and silver, decreasing supply and increasing prices.

Conversely, a policy shift toward greater production and export can increase supply, driving down prices.

These factors don’t exist in isolation. Economic conditions can trigger geopolitical events and vice versa, so it’s essential to consider the broader context when timing the market.

Short-Term Investing

Short-term investing can be profitable, especially if you closely monitor economic and geopolitical developments. While major events like rising inflation can indicate when prices may rise, it’s challenging to time market lows and highs precisely.

Day trading in gold and silver is legitimate and can be lucrative, provided you stay informed. However, short-term timing is inherently risky, as prices don’t always respond predictably to events.

Long-Term Strategy

Long-term investors are less concerned with daily price movements. They focus on gradually increasing their holdings over time, often using a strategy like Dollar-Cost Averaging (DCA). DCA involves purchasing precious metals at regular intervals, regardless of the current price, to average out the cost per ounce over time and reduce exposure to volatility.

While a long-term strategy offers stability, it may miss potential short-term gains. Still, the historical upward trend in precious metals makes this approach effective for wealth preservation.

Historical Insights on Gold and Silver Prices

Historically, gold and silver prices often move opposite to economic performance, with people seeking precious metals as a safeguard during downturns. Below is a summary of how gold performed in past economic recessions.

Recession Performance

• 1973 – 1975 Oil Shock Recession: Gold rose from $68.65 in February 1973 to a peak of $187.75 in November 1974, nearly tripling in value.
• 1980 – 1982 Recession: Gold soared from $196.25 in 1978 to $684 in January 1980, though it fell to $325 by recession’s end.
• 1990 – 1991 Recession: Gold prices remained mostly flat, ranging from $366.75 to $386.20.
• 2001 Dot-com Bubble: Gold moved slightly from $260.65 in March 2001 to $278.85 by year’s end.
• 2007 – 2009 Great Recession: Gold rose from $651.20 in mid-2007 to over $1,000 by September 2009.
• COVID Recession: Gold rose modestly, from $1557.80 in February 2020 to $1696.24 in May 2020, continuing to climb past $2,000 post-recession.

Takeaways

The price of gold often rises during recessions, though it doesn’t always maintain those peaks. Understanding other market indicators can provide a clearer picture before investing heavily in a downturn.

Silver Volatility

Silver behaves differently than gold due to its higher industrial demand in sectors like electronics, medicine, and photography. The price of silver fluctuates more dramatically, influenced by technological developments and economic health.

Since silver is also used in luxury items, economic slowdowns can decrease demand, leading to lower prices. Silver is generally more affordable than gold, making it accessible but subject to more price volatility.

Gold and silver often reflect economic health and stability. Gold tends to rise during economic downturns as a “safe haven,” while silver’s price fluctuates based on industrial demand and economic trends.

We hope these insights help you time your investments effectively. JM Bullion offers a wide selection of gold, silver, and other precious metals, and we’re here to help you find options that fit your budget and investment goals.