Timing Gold Prices

If you ever want to see how hard it is to time the market—any market—consider the recent drop in the price of gold. Headlines got our collective attention by proclaiming the largest one-day dollar loss in almost three years. The decline was blamed on news that the U.S. and China were engaged in a fresh round of trade talks, but the general idea behind the stories is that when news is good, gold prices go down, and when news is bad, gold becomes more valuable in the eyes of people who want their assets in a safe haven.

The five-day chart that went out with some news reports is reproduced here, and what catches your eye is a really dramatic drop over the course of one day. So doesn’t that mean this is the time to take advantage of bargain prices, and scoop up some gold for your portfolio?


If you were to do a bit more research—and simply glance at a chart showing prices over the past 20 years—you see that gold bullion is not exactly cheap at the moment. As a matter of fact, in historical terms, it’s rather expensive. Buying now means, not getting a bargain, but purchasing at a premium to historical prices—just not as big a premium as a few days ago. The high price of gold makes sense, given how much uncertainty there is the world today, and especially in a jittery American economy.


Short-term and long-term thinking are in a constant tug-of-war with each other, and so too are perspectives on the relative pricing of different investments. If we get clarity about the U.S. trade war, Brexit, Iran, North Korea, Hong Kong and the U.S. military exit from Afghanistan, then gold prices might settle down to the prices we saw in the much calmer era of the early 2000s. That, of course, is just a guess, but the takeaway here is that today’s headlines about any asset are seldom a reliable buy or sell indicator.

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