Demand for gold is increasing sharply as the economic consequences of recent fighting between Palestine and Israel remain uncertain.
More New Zealanders are choosing to buy gold after the re-emergence of war in the historically volatile region.
On the 6th of October, the spot price of gold was $3069. On the 15th of October it had spiked to $3293.09 – more than a 7% increase in just over a week. ”
Tony Coleman, director of New Zealand Gold Merchants, says “he’s not surprised and has seen this pattern repeatedly during times of global unrest”.
“We saw this happen in 2022 when Russia invaded Ukraine. As soon as news reached New Zealand that the first missile had hit, the NZ gold price started to rise immediately.”
Coleman says investors should try to remain calm in the face of economic uncertainty and avoid getting emotional about the situation.
“The best time to buy an investment is before you need to, otherwise investors can make rash decisions that aren’t in their best interests.
“My advice to investors is don’t let the fear of missing out guide your decisions.”
Inflation is another factor that causes increases in the price of gold. New Zealand’s inflation rate eased to 6% in the quarter to June 2023 – down from 7.2% in December 2022 – following a global trend of declining inflation.
However, the current war could put upward pressure on global inflation if it continues and more countries get drawn into the conflict.
This, in turn, could cause more people to invest in gold as the value of their cash in the bank declines.
“When inflation is rising, your money is worth less, at least temporarily. In 2021 and 2022, when inflation was at its peak, we saw a massive increase in mum and dad investors putting their money into gold for the first time,” Coleman says.
He says the influx of new investors is welcome, but there is a risk that if demand increases too quickly, their investment could become overvalued.
However, Coleman says there are things investors can do to avoid this.
“When you invest in gold, it’s important to think long term. Gold is not a get-rich-quick scheme, and impulsive investors have lost money going into it with that mindset.
“The best time to invest in gold is when the markets are calm and the price of gold is going downward or sideways, which usually happens when the economy is going well.”.
Coleman recommends investors implement a strategy of buying gold regularly over a long period of time, and not selling it.
“This is the best way to avoid the peaks and troughs that inevitably occur when it comes to investments.
“On average, the price of gold has risen 12 per cent per year over the last 25 years, a significant increase and excellent reason to have gold as part of an investment portfolio.”
Interested in learning more about how gold prices track in light of good economic times and bad? Check out gold prices on the New Zealand Gold Merchants website.