Investing in Gold: The Enduring Wisdom of a 'Buy and Hold' Strategy
Examining the optimal timeframe for gold investments involves analyzing its long-term upward trend and the market's increasing volatility. This comprehensive understanding reveals why a 'buy and hold' strategy for physical gold is becoming paramount.
For what period does it make sense to buy gold?
When considering the advisability of investing in gold, it's important to understand the dynamics of this market. The price of gold, in all currencies, shows a long-term upward trend, which is estimated to continue for at least the next five years.
Moreover, in recent years, this trend has accelerated, especially after breaking the $1000 USD per troy ounce mark. If it took seven years for the price of gold to rise from $250 to $1000 per ounce, then reaching the $2000 level from $1000 is expected to take no more than two years. Such dynamics in the gold market are described as parabolic acceleration.
Risks of Short-Term Trading in the Gold Market
Attempts to catch 'local waves' within the overall long-term upward trend are best left to professionals. These are specialists who possess (or believe they possess) knowledge of the moments for buying and selling.
For those who are not professional gold traders, attempts to play 'the short wave' are highly likely to lead to losses. Amateurs have no place in this market due to increasing price volatility.
Just five years ago, a 2% intraday price movement was considered a significant event. Today, however, intraday fluctuations of 5% or more have become quite common. This increased volatility has affected almost all markets, including currency markets, and is projected to continue rising over the next one to two years.
Volatility as a Key Factor in Growing Demand for Gold
One of the main factors driving the increased demand for gold has been the rise in currency exchange rate volatility. Exchange rates for key world currencies, such as the US dollar, can 'jump' by several percent a day, which raises concerns among people about holding savings in any single currency.
Such instability makes it difficult for businesses to build long-term plans, especially in the areas of export or import of goods and services. Entrepreneurs are forced to factor their 'volatility insurance' into their profit margins, which, in turn, contributes to further price increases.
The 'Buy and Forget' Strategy for Physical Gold
Summarizing the current market situation, several key aspects confirm the advisability of long-term investments in physical gold.
- **The long-term upward trend in gold prices** maintains its strength and shows parabolic acceleration.
- **Increased volatility in quotes** makes short-term speculations extremely risky for non-professionals.
- **Gold serves as a reliable store of value** amidst growing instability in currency markets.
- **The 'buy and forget' strategy** is suitable for physical gold, especially in the form of gold coins, for holding assets for a year or more.
This is why physical gold, for example, in the form of coins, is recommended to be treated according to the 'buy and forget' principle, holding the asset for a year or longer.