Record rise in gold prices appeals to the imagination: is this the time to invest?

In 2014, a gram of gold was worth about 30 euros. Now, ten years later, the gold price is more than 70 euros per gram. A one-kilo gold bar sold for around 70,000 euros in April 2024. So a more than doubling of the price. Why is the precious metal so expensive now? And what are you doing right now? Is this the time to sell grandmother’s gold?

Why is the gold price so high now?

The world buys gold when monetary uncertainty or geopolitical tensions increase. For example, the gold price immediately shot up during the global financial crisis of 2008, the same applied to the corona pandemic of 2020. Gold is currently very popular again with central banks due to increased tensions in world politics, such as the wars between Ukraine and Russia and between Israel and Hamas, says investment expert Karel Mercx of the Dutch platform Beleggers Belangen. “A lot of central banks are hoarding gold right now. If you look at who is stocking gold at the moment, they are hardly private investors.”

Why do central banks buy so much gold? According to Mercx, this has to do with the growing desire of countries to reduce America’s influence. “We live in a world where the main currency is the US dollar. We do absolutely everything with that. In shipping, for example, everything is in dollars and if you, as a European country, buy oil in the Middle East, you also pay in dollars.”

America benefits enormously from this position of power in the global economy, says Mercx. “The Americans control the dollar and they can use their currency for their own gain. No one controls gold, so investing in gold is a way for certain countries to break away from the US dollar.”

Is this the time to get in?

“I would say not, but that actually applies to every moment,” says Arend Jan Velsink, investment director of online bank Brand New Day. “Normally, as an investor you want to buy when the price is low and sell high again. If you keep that in mind and see that the gold price is now at an all-time high, now would not necessarily be a smart time. On the other hand, something that goes up very fast can also go up much faster.”

Will things remain turbulent on the world stage for the time being? Then investing in gold can be very profitable, although that is not a guarantee. Mercx: “Maybe China decides to challenge the US, then new unrest will arise. The same if prosperity in countries such as Brazil and India suddenly improves significantly. Then it could be interesting to invest in gold.” In addition, central banks around the world are talking about upcoming interest rate cuts, Mercx notes. “And when interest rates go down, gold generally becomes more attractive.”

What does gold bring you?

It is impossible to predict how much you can really earn or lose on your investment in gold, says Mercx. “The problem with gold is that the returns are not evenly distributed. Sometimes you have a period with plus 20 percent and sometimes you have a period in which the gold price falls very quickly.”

Velsink also emphasizes this. “If you look at shares, you know what your source of return is: the company in which you are a shareholder. You can then predict or even expect that the company will grow and make a profit in the long term. With gold you have no direct source of return. The price of gold depends on sentiment and supply and demand. As a result, you see that prices can go up very quickly, but also down very quickly. Estimating developments is very difficult. Choosing the exact moment is not possible. Gold is now in demand and the price has risen as a result. You don’t know whether it will go up even further after that or not.”

According to Mercx, it is not necessarily about the timing of the market, but about how long you are in the market. With all investments, time is your friend. The longer you are in the market, the more time the investment has to yield. “For people who want to get rich quickly, investing in gold can therefore be a disappointment.”

How do you invest in gold?

Investing in gold can be done in different ways. The most obvious way is to buy physical gold. Think of gold in the form of bars or coins, or even gold jewelry. You can keep it at home – or store it in a monitored safe for a fee – and sell it again at a later time, if you wish. Please note: providers of physical gold buy your gold below the market price and often offer it well above the market price. That’s how they earn it.

You can avoid this problem if you join online brokers such as DEGIRO and Plus500 and invest in gold through them. You can also buy a Gold ETC (Exchange Traded Commodity), also called a gold tracker, or an ETF (Exchange Traded Fund). These are funds that are linked one-to-one to the price of gold. This way you can benefit from price developments without owning gold yourself.

Mercx explains that physical gold can give a safer feeling. “If you have a gold bar in your hands, you know for sure that it is there, online investments are of course not tangible.” According to Mercx, you don’t have to worry about the reliability of investing through a broker: “These are parties that fall under strict regulations and hire accountants to count all gold bars.”