The price of gold has been going up and down over the years. There have been some dramatic changes in the price fuelled by issues like central banks buying more gold, inflation, monetary policies and geopolitics. One of the biggest drivers of the price of gold is the value of currency, particularly the value of the dollar. Unfortunately, fiat currencies are vulnerable and having a weaker dollar makes gold less expensive for foreign buyers. The best time to sell gold is not when the currency is at its weakest but at its strongest and therein lies the problem. Trillions of US dollars have been printed since 2008 to resuscitate the housing market and the besieged stock market. Having more currency in circulation increases inflation and places pressure on the gold and silver markets. So why should the US currency or the printing of more US dollars matter to someone living in Australia? The reason is because most if the world uses the US dollar to trade. The spot price of gold is expressed in US dollars but when you sell your gold to gold buyers Melbourne would have to convert to gold price into Australian dollars.
The problem with gold is that there is no sure way to tell when it is the best time to sell what you have. You could hold on to your gold and see the price tumble or you could sell at the highest price you think gold will ever get to only to see it rise past that point. In 2008 the price of gold was around $850. By then it had been climbing slowly. Because of the financial crisis most people believed that it had been pushed to the highest point it could be but 3 years later it had shot to $2,000. Advocates for “ the-buy- and-hold” strategy were vindicated. However, when you look at it, people were dipping into their savings by then and they needed the cash.
The market is a little complicated. We would like to believe that supply and demand are the only factors that drive the price but there are other issues that come into play.
The purposeful destabilisation of the market by short sellers. Most market watchers interpret this as price manipulation by central banks. This isn’t the case. Central banks are the biggest buyers and sellers of gold, so it is important to study and take cues from what they are doing. Central banks are more concerned with the value of currency. Having the price of gold rise higher and faster undermines and weakens the currency.
When paper contracts are sold off at a rapid rate by large banks, markets and investors go into panic mode and start selling. Looking back at the gold market, sharp drops in prices have been preceded by huge paper contract sell-offs by a couple of small firms. Private gold buyers might see this as a sign to sell their gold as well but this price drop only lasts for a short time and then it goes up again.
Claims of price manipulation have plagued the precious metals industry for over a century. These rumours were finally substantiated in October 2016, when American traders successfully sued the German Deutsche Bank and other conspirators for gold price fixing spanning a period of 8 years. So, you can see why people put so much stock in what the central bank and other financial institutions are doing.
You may ask what this has to do with selling gold? Well If have any intention to sell your gold you need to be aware of what goes on in the market and not make decisions without weighing all the factors. Are central banks buying more gold? Yes. Is the stock market interested in selling or buying more paper contracts? Yes. Has the US dollar gotten stronger or weaker since 2008? It has weakened. So what does that all mean for the people selling gold to Gold buyers Melbourne or anywhere in the world? There are always bigger forces at play. There is no perfect time to sell your gold. The point of buying and keeping gold is so that you can have access to cash when you need it.
