Selling your gold, whether it's in coins, bars, or jewelry, is relatively easy once the decision has been made. There are plenty of reputable gold dealers who will give you a fair price for your gold based on the current market price of the metal. Making the decision is sometimes difficult, however, as the best time to sell your gold might be unclear. Naturally, you want to sell when it's advantageous. This article examines some key things to consider regarding the best time to sell.
Dow to Gold Ratio
An important metric regarding the sale of gold is the Dow-to-gold ratio. This metric tracks the relationship between the price of gold and the Dow Jones stock market index. The ratio tells you the number of gold ounces needed to purchase one share of the index. When the ratio reaches historically lower levels this often means that gold prices have reached a peak, which makes it a good time to sell.
Gold as an investment tends to perform better when interest rates are low. When interest rates are high, investors often sell their gold to purchase other investment vehicles, such as bonds, that offer interest. Gold does not provide interest, so selling when interest rates are high has considerable logic behind it.
When factoring interest rates into your decision to sell, it's crucial that you understand the difference between real interest rates and nominal rates. The nominal rate is the rate set by the government and lenders, while the real interest rate is the nominal rate minus the rate of inflation. So, if the nominal interest rate is 8 percent and the rate of inflation is 5 percent, then the real interest rate is 3 percent.
Another factor that comes into play, which is more subjective than the Dow to gold ratio or interest rates, is when you start to hear more discussion about the price of gold, either from friends and acquaintances or in the media. As the price of gold rises, the rise attracts much more attention than usual, which means that the price could be peaking. In this case, you would be selling around the top of the market and get a great price for your gold.
In addition to these considerations, you might have important personal reasons for selling your gold, such as a financial emergency, giving money to a family member, or making a large purchase, such as a vehicle or an appliance. Ultimately, only you can determine when to talk with a gold buyer about selling your holdings.