Missed Opportunities: The Surprising Risks of Timing the Market

Gold has rallied in recent weeks and is currently trading around $2,070 per ounce. According to data from Refinitiv, the spot price of gold hit a record intraday high of $2,072.5 on Aug. 7, 2020. Could gold close at all-time high?

Today, we’ll discuss why gold is making moves higher – as well as the best way to make sure you get the most out of your long-term gold investments.

Before we delve into that, let's first explore some interesting gold facts and test your knowledge with this week's trivia question...

The Original Heavy Metal  
Gold is one of the heaviest and densest of all metals on the periodic table. A cubic foot of pure gold would weigh 1,205 lbs. That’s more than half a ton.

The Myth of the Bond Girl's Death
Contrary to a widely held urban legend, Shirley Eaton, the 'Bond girl' from the 1964 film Goldfinger, did not die from being painted gold. She even appeared on a 2003 episode of MythBusters to debunk this myth.

Switzerland was the Last Country to Leave the Gold Standard
Until 1999, the Swiss franc was officially bound to gold, as part of the country's constitution. In a referendum held in 1999, Swiss voters decided to remove the constitutional requirement that had required the Swiss franc to be backed by 40% gold.

❓Nuggets Trivia of the Week❓

Considered by most authorities to be the biggest gold nugget ever found, the “Welcome Stranger” gold nugget weighed in at a massive 173 lbs – over 2,284 troy ounces of gold. Where was the “Welcome Stranger” nugget discovered?  

A. Australia
B. South Africa
C. Ghana
D. Russia

Scroll to the bottom of this email for the answer...

The Hidden Risks of Timing the Market

Buy low, sell high...

It seems like a straightforward path to success. However, what if you get your timing wrong? Or, more concretely, what happens to your overall return if you’re sitting on the sidelines during, say, the best one or two days of the year?  

To answer this question, Alan Hibbard, our in-house analyst, created this table. It includes the top five daily returns for gold in 2023.

The highest daily return was on October 13, when gold surged by 3.11% in a single day. And if you look at the top four days for gold, the cumulative return for those days totaled 11.63%. That means gold’s best four days in 2023 were enough to surpass gold’s entire year-to-date return (10.2%).  

So, what does this tell us?  

These findings reinforce the challenge of market timing. Aiming for optimal entry and exit points is not only difficult but can often be counterproductive. As seen with gold, missing key days can significantly impact an investor's returns. If you were buying and selling throughout the year, and if you missed just these four days, you would have lost 1.29% while everyone else gained 10.2%.  

While timing the market might be tempting, the cost of getting your timing wrong is huge. For most investors, a long-term buy and hold approach is the safest and most reliable plan.  

Is a New Peak on the Horizon for Gold?

In recent months, gold has experienced a significant surge, with its price surpassing $2,070 per ounce – an impressive 13.6% increase in just two months.

But what's driving this remarkable rally? A few things.

The first is likely interest rates. The market sentiment is increasingly convinced that U.S. interest rates have reached their peak. Typically, higher interest rates can dampen gold's appeal since gold, a non-yielding asset, does not benefit from interest payments. As interest rates rise, investments like bonds or savings accounts become more attractive compared to gold.

However, when interest rates plateau or start to fall, the scenario flips. Lower or stable interest rates reduce the opportunity cost of holding gold. In addition, peaking interest rates often signal a response to economic concerns, such as inflation or economic slowdown, scenarios where gold traditionally shines as a safe-haven asset. The idea that interest rates have hit their ceiling could be boosting gold’s appeal and contributing to its recent price surge.  

If you’re not sure about what’s coming next, then hedging your portfolio with gold could be a great option. We believe that you should always own a bit as part of your asset allocation, because it’s a decent hedge against whatever the future of the market may hold.  

Add To Your Gold Portfolio Today

That’ll wrap up this edition of GoldSilver Nuggets – until next time!

Best,

Brandon S.  
GoldSilver

❓Nuggets Trivia of the Week❓

Considered by most authorities to be the biggest gold nugget ever found, the “Welcome Stranger” gold nugget weighed in at a massive 173 lbs – over 2,284 troy ounces of gold... Where was the “Welcome Stranger” nugget discovered?  

A. Australia
B. South Africa
C. Ghana
D. Russia

The Welcome Stranger was unearthed by Cornish miners John Deason and Richard Oates on February 5th  1869, nine miles north-west of Dunolly, Australia. Their “nugget” would be worth over $4.5 million at today’s prices.