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How important are gold prices?

Price is only one factor to consider when deciding whether to invest in gold. Getty Images

Gold prices have been high this year. From October 31, 2022, to May 8, 2023, they climbed from $1,637 per ounce to $2,028.50, according to the World Gold Council — approaching the all-time high of $2,067 set in August 2020.

But there have been times in that span when prices cooled, most recently this past week when the U.S. Labor Department released an encouraging jobs report. Whether or not this is a sign gold prices are entering a cooling period remains to be seen. But it may have some investors wondering if gold is still worth buying.

Many experts predict gold prices will remain high in the near future, if not rise a bit further. But just how important are prices when it comes to deciding whether you should invest? That's what we'll explore below.

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How much attention should you pay to gold prices?

When deciding when to purchase an asset, price matters more with some than others. Stock investing, for instance, generally follows the old adage of "buy low, sell high." But stocks are extremely volatile, sometimes gaining or losing most of their value overnight. Timing your purchase to capitalize on these swings can pay off significantly.

Gold prices, however, tend to remain fairly stable despite temporary market fluctuations. While the value may rise and fall in the short term, it will rarely do either by such a large amount that you should base your entire investing decision on current gold prices.

While you could boost your returns by buying when gold prices are down, high prices don't mean you should stay away, either. Rather than trying to time the market, you're better served by viewing gold as a long-term investment. Whenever you purchase it, it has the power to help you protect your portfolio in several ways.

Find out if gold investing is right for you by requesting a free investment guide today.

Why gold is a valuable investment at any price

Gold's real value as an investment has less do with its price and more to do with the benefits it provides to investors. Specifically:

  • It diversifies your portfolio: When assets like stocks and bonds drop in value, gold prices tend to hold steady (if not rise). This makes gold a great way to balance your portfolio and protect it from losses, no matter what prices are currently doing. 
  • It's a hedge against inflation: Gold has an inverse relationship with the dollar. In other words, when the value of the dollar goes down (as it does during inflation), gold prices tend to go up. This can help preserve your purchasing power and provide emergency cash if your wallet is feeling the pinch of high prices.
  • It helps you weather economic storms: Economic turmoil can devastate your investments. Fortunately, gold tends to shine during trying financial events like stock market crashes and recessions, making it a valuable addition to any portfolio.

The bottom line

Gold prices have been in the news a lot lately, boosting investor interest in the precious metal. But price is only one factor to consider when deciding whether to invest in gold. Take a holistic look at its pros and cons and consult a financial advisor if you need guidance on the best way to incorporate gold into your investment strategy.

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