When is the right time to buy gold? How you can know for sure if it's the best time to make profits

If you’re unable to decide if you should buy gold now or wait, you’re among almost every investor that asks before buying gold: Even if I get a good price now, will I be able to get a better price later?

Even though gold’s long-standing and safe-haven characterises sets it apart from its rivals, we all want the best price we can get – and any good consumer will consider the timing of their buying decisions.

#1 - Know what months in a year gold is often cheap

Historical analysis of gold prices since 1975 reveal beneficial cost-effective patterns, wherein prices tend to surge during the first few months of the year.

The price cools down March through August, then takes off again in the months of September, October and November.

This means that on a historical basis, the best times to buy gold are early January, March and early April, or from mid-June to early July.

While there are years when gold price falls and also years it soars, averaging out those surges and plunges, investors will get their best price at the very beginning of the year, or end of the year before.

Since 1975, gold prices tend to drop the most in March. Analysis shows April might offer a slightly lower overall price, but March is when gold consistently falls the most and is thus one of the best times to buy.

#2 – Plan when you aim to sell the gold before you buy it

Are you buying gold now to sell soon or much later? The purpose of buying gold will decide if the right time for you to hold onto it is now.

Investment experts often reiterate how understanding your investment goals and risk tolerance helps determine when the time might be right for you to allocate a portion of your portfolio to gold.

If your goal is diversification, consider gold for a long-term time horizon that accounts for gold’s positive or negative correlation to other assets.

Some investment experts assert that gold is an asset with intrinsic value, making it unique and necessary for investors to hold in their portfolios for the long term.

Although the commodity could be just as volatile as stocks in the short term, it has been proven historically to appreciate in value in the long term.

Over the past 20 years, the price of gold has increased 580 per cent to about $1,800 per ounce, which is the average price level seen currently.

So if you plan to sell the gold later, given the historical prices trends, it would be prudent to hold onto it. If you plan to sell it in a few months’ time, see if it’s cost effective based on the above monthly trends.

#3 - How much gold you buy will determine aptness of timing

After determining your investment goals, consider how you would like to invest in the commodity.

It is possible to invest in gold through a variety of ways, including through exchange-traded funds (ETFs) and mutual funds, buying stock in gold miners and owning the physical product.

Each gold-related investment product has its own risk and return profile, as well as liquidity characteristics and fees.

Regardless of the form of gold you choose, advisors generally recommend allocating about 5 per cent of your portfolio to the commodity and certainly no more than 10 per cent.

Investing in gold ETFs and mutual funds can provide investors with exposure to the metal’s long-term stability while offering more liquidity than physical gold and more diversification than gold stocks.

Gold stocks are an option for investors who like the idea of adding exposure to gold but do not want to buy the physical commodity.

Physical gold is a good option for those who want direct exposure to gold, especially since it is typically less expensive than investing in gold ETFs.

#4 - Gauge the relation between global economic growth and gold prices

A potentially good time to invest in gold is when a recession has just hit, bringing prospects of rising inflation and declining rates.

If rates are expected to increase alongside inflation, typically mid-cycle (average peak of global economic growth), then the opportunity to profit from an investment in gold may have already passed.

The commodity is not correlated to stocks, bonds or real estate, providing investors with further opportunity to mitigate risk by spreading out their investments in different assets.

Additionally, people sometimes invest in gold to hedge against inflation, with the idea being that gold appreciates and preserves wealth even more in an environment where investors face rising inflation.

As such, investors often position some of their investments in gold – a hard asset that has traditionally maintained its value as inflation increases.

Others turn to gold as a safe haven during times of global economic uncertainty because the commodity appreciates when there is an aversion to risk in the markets.

Gold is still a very small proportion of most people’s portfolio, but experts explain how even an increase of 1 to 2 per cent can have a major bearing on the profits an investor makes in the short or long run.