For many years, gold and other precious commodities were valued as investments due to the perception that they were stable and reliable. This is a dangerous mindset to apply to any type of investment, but for the better part of the last decade, gold investors enjoyed steadily rising prices and very low risk. However, trends in gold prices between 2013 and 2014 essentially shattered popular ideas about the precious metal. The prices began to fall steadily, and in November of last year they reached a four-year low, as reported by Financial Times.
The result is that heading into 2015, the gold market for investors was marked with more uncertainty than we’ve seen in 10 years or more. Suddenly, it seems fair to ask: are there still benefits to gold investment? This is ultimately up to each individual investor to decide, but here are some of the reasons that gold is still worth consideration.
First of all, the price has already rebounded rather encouragingly. According to Bullion Vault, an online gold investment market featuring up-to-date prices on precious metals, the current price is hovering around $1,262/ounce (or £834) in London banks. This price is listed as of Feb. 3, 2015. For reference, it’s very slightly ahead of the price at the same time in 2014, but over $100/ounce higher than the November low referenced previously. There’s still a long way to go before previous highs are reached, but this listing in a reliable online market displays a clear, if incomplete, recovery.
Next, there is still some long-term appeal that applies not only to precious commodities but to various alternative investments meant to be held onto for years at a time. We referenced investments like these in a 2012 article on Investment Properties, covering topics such as the appreciation of a building or piece of land in value over time, and the same concepts hold true in real estate, commodities, and other alternative investments today. Essentially, this is to say that there’s no reason to believe the long-term value of gold‚ looking years into the future‚ should suffer significantly. Those seeking short-term gains would probably be best suited investing their money elsewhere. Given the limited worldwide supply of gold, relatively slow mining process, and constant demand that increases with each economic uptick, though, gold can still be viewed as a long-term appreciation play.
There are also some reasons to expect continued recovery in 2015, though all should be taken as speculative in nature. The Wall Street Journal provided a nice outline of the year ahead in gold, offering support for both bullish and bearish outlooks. However, two factors are constant in both arguments: increased demand in the Far East and turmoil in eastern Europe and the Middle East stand to help gold prices rise.
In the Far East, it’s primarily India that’s offering encouragement, as lighter restrictions on imports have increased precious metal consumption. Meanwhile, falling oil prices and international conflicts in the Middle East and eastern Europe have convinced some investors to return to the popular idea of investing in gold as a safe haven.
The counter to these factors is the recovering strength of the U.S. dollar, which tends to have a negative impact on gold prices. It’s reasonable to expect the other factors to outweigh this one in 2015, though; just don’t expect significant upticks in the short-term.
None of this means that investors should necessarily be flocking to the gold market, and gold should by no means be labeled as “safe,” as has been the case in the past. But the struggles for precious commodities in the past two years should be viewed as trends that are now in the past, with gold seemingly positioned for at least a partial lasting recovery.