Volatility Explained: Investing in Gold

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What is Volatility and Why Investing in Gold Matters

Throughout your journey of investing, you will come across many terms that seem like you need to take an economics class to understand. One of those terms may include volatility. While investing in gold generally takes little-to-no experience or knowledge to start investing, seasoned investors who keep a very close eye on their portfolios will keep watch on volatility. Keep reading to learn more about volatility and why investing in gold is so important.

Understanding Volatility

According to Investopedia, volatility is a statistical measure of the dispersion of returns for a given security or market index. In most cases, the higher the volatility, the riskier the security. Volatility is often measured from either the standard deviation or variance between returns from that same security or market index.

In the securities markets, volatility is often associated with big swings in either direction. For example, when the stock market rises and falls more than one percent over a sustained period of time, it is called a “volatile” market. An asset’s volatility is a key factor when pricing options contracts.

Key takeaways regarding volatility include:

  • Volatility represents how large an asset’s prices swing around the mean price—it is a statistical measure of its dispersion of returns.
  • There are several ways to measure volatility, including beta coefficients, option pricing models, and standard deviations of returns.
  • Volatile assets are often considered riskier than less volatile assets because the price is expected to be less predictable.
  • Volatility is an important variable for calculating options prices.

Volatility of Gold

Investors of all kinds keep an eye on the volatility of gold specifically. Why? Because the volatility of the gold market is important for analyzing the current and future prices of gold as well as what’s going on in other markets. This is because as the value of the dollar decreases, the value of gold rises. By looking at gold’s price, volatility, expectations, and more, you can predict how the rest of your investments will pan out as well in both the short-term and the long-term.

At the time of this blog’s publishing, Gold’s volatility rocked the market this week as critical support levels broke and prices tumbled towards $1,650 an ounce. However, what the precious does next will depend on the language Federal Reserve Chair Jerome Powell uses at the central bank’s monetary policy meeting next week.

Gold saw an $80 move this week, tumbling to $1,661 — the lowest level since April 2020. December Comex gold futures were last trading at $1,682.60, down 2.7% on the week.

“Gold slumped amid expectations of more aggressive rate hikes by the Fed … after data showed demand for workers in the U.S. remains strong. Retail sales were also reasonable. This is likely to keep the Fed on the tightening cycle for the foreseeable future.”

Why Investing in Gold is Important

There are so many reasons why investing in gold is so important and an asset to everyone’s portfolio. These include:

  • Gold price in 1920 was $20.67, and gold Price climbs to a record high of $2021 per ounce in 2020.
  • Historically, the gold price has now risen 100 times over the last 100 years. Experts say this upward growth trend is expected to continue.
  • Gold is a reliable store of value.
  • Gold is globally recognized, accepted, and traded.
  • Gold has been a purchasing power for thousands of years.
  • It’s rare and in limited supply; you can’t keep making it.
  • It doesn’t change the value as much, for example, as currency.
  • It is a lot more durable than investing in food or something perishable.
  • Gold is a hedge against inflation caused by the mounting debt and rising costs.
  • Gold outperforms most stocks, including high-flying technology stocks, bonds, equities, and commodity markets.
  • Gold is a common investment around the world, and people see gold as something prestigious with intrinsic value.
  • Gold is also an attractive liquid asset because it is easy to buy and sell.

About Priority Gold

If you are ready to invest in gold to protect your savings and secure your future, we can help. Priority Gold is one of the most trusted precious metals dealers in the United States with BBB A+ Rating, AAA Rating with Business Consumer Alliance, and 5 Stars Rating with TrustLink.

We specialize in providing precious metals investment services with Security, Liability, and Great Convenience for customers. Our team is committed to helping to streamline their precious metals purchases at a fair price, selecting the right precious metals portfolios, and meeting their important financial objectives.

We offer Free Storage for qualifying Gold & Silver IRA accounts, a fast & easy gold buying process, and smooth IRA Transfer. And gold shows up on schedule. Priority Gold guarantees the highest standards of customer service, which comes with honesty, professional conduct, and an Ethical Code of Business.

For more information, visit us at prioritygold.com

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