The political and economic situation in the world also has an effect on the price of gold. During the recent recession when the interest rate dropped to near record low levels, the price of gold has been steadily on the rise. The reason is simple – when the rate drops investors pull money out of interest earning accounts since it becomes less and less attractive to hang on to cash and pour it into commodities like gold. Have a look at how much is a gram of gold.
Tensions in the Middle East also have a direct effect on gold prices since gold is highly influenced by other commodities such as oil. War in Iraq and instability in Iran play a big part in recent spike of gold prices. While this maybe controversial, the sad truth is wars drive economies and while most governments would never admit to it, wars are very profitable and necessary to sustain economic activity and increase global wealth.
Now let’s get back to our original question – Is it time to sell gold? It is a complicated question, but I believe that the near term outlook is far higher prices for commodities and I think we have not reached the peak of gold prices. If you are an investor looking for investment opportunity then gold and other commodities should be on your list and one of my previous articles describes in detail the various ways to invest in gold. Many financial advisors would recommend to have at least 5% of your holdings in gold; I would even recommend at this time to increase gold to 15% of your portfolio and always keep your investments diversified to protect your assets. On the other hand, there are also good reasons to sell gold now especially if you are faced with financial hardship since prices have never been this high and it is worthwhile to consider selling gold to meet other financial obligations. If you invested in gold 5-10 years ago and made a decent profit, it may be worth while to sell in your specific situation. If you are on the verge of losing your house and still holding on to gold jewelry you inherited, I strongly encourage you to look into selling gold now.