The price of gold has been on a seemingly unstoppable rise throughout much of 2024. Starting the year at just $2,063.73 an ounce, gold surged past $2,700 by the end of October, with many experts predicting that prices could surpass $3,000, perhaps before the end of the year.
But that rally ended in early November, and gold is now below $2,600. Gold prices today (November 18) are at $2,591.7 an ounce.
The drop in gold prices could cause investors to reassess their strategies, CBS News columnist Matt Richardson said. He advised investors to remember three things:
Price drops are normal (and usually temporary)
Gold's drop from nearly $2,700 to below $2,600 in less than a month may feel like a significant drop to investors, but it's important to take a longer-term view of gold.
Gold was just under $2,600 in September, so the price change isn’t that big. And more importantly, drops in gold prices are normal—and usually temporary.
While falling prices are inevitable, gold tends to move in a steady upward direction. By understanding this historical dynamic, investors can act now rather than waiting for prices to fall further.
Gold is a safe haven asset
While the price of any asset is important, it is equally important to remember the traditional functions of gold in an investment portfolio, which is not to generate income but to be a safe haven asset to protect other more volatile assets.
Gold is a hedge against inflation known for its ability to provide a buffer when stocks, bonds and even real estate underperform.
And that reputation hasn't changed just because the price has dropped 5% in recent weeks, nor is it likely to change in the future.
Gold prices are unlikely to return to their old levels.
While a drop of a few hundred dollars in the price of gold may tempt potential investors to wait for a cheaper, more ideal time to buy, it is unlikely that gold prices will return to exactly their previous levels.
Inflation edged up slightly in October compared to September. And, as seen in recent years, when inflation rises, interest in gold spikes and prices (generally) rise as well.
Waiting for this drop to return gold prices to early 2024 levels could then be a mistake.
Bottom line
The fall in gold prices should be assessed for the pros and cons it brings to investors, but should not be over-analyzed.
After all, falling gold prices are normal and usually temporary. And those changes are unlikely to diminish the metal's ability to serve as a safe haven.
However, gold prices are not going to fall back to levels seen earlier this year or even in 2023, so investors waiting for that to happen should take note, especially now before gold has a chance to rally again as inflation picks up again.
Just remember to stick to the traditional gold investment limit of 10% of your total portfolio, notes expert Matt Richardson.
