Spike in gold prices may cause some to cash in

Photo (c) Peter M. Fisher - Getty Images

One expert offers things sellers need to consider

With surging oil prices and a war raging in Ukraine, the price of gold shot up this week, reaching its highest level in 19 months.

Tuesday’s price for the precious metal hit $2,069, just shy of the record high set in August 2020. Gold has lost a lot of its luster since that time, with more money moving into cryptocurrencies and away from the traditional inflation hedge.

The current rebound in gold prices may cause some people with gold jewelry or gold coins to consider selling. Fergus Hodgson, director at Econ Americas and deputy editor of the Gold Newsletter, says predicting where gold prices go from here is extremely difficult.

“There are many unknowns, particularly geopolitical developments,” Hodgson told ConsumerAffairs. “Given what we saw in 2020, though, there is substantial room for upward movement. This is not a bad time to sell gold, but prices could still rise plenty.”

At the moment, gold faces competing catalysts. On one hand, times of uncertainty caused by the Russian invasion of Ukraine tend to make gold an attractive safe haven.

However, the current state of the economy is necessitating a rise in interest rates. Not only are policymakers raising rates, but bond yields are also moving higher. Market analysts say rising rates sometimes make gold less attractive.

What to do before selling

With prices at current levels, gold dealers – including retail jewelry stores – may step up their marketing efforts. When prices rise, signs declaring “we buy gold” often appear in store windows. Hodgson says consumers deciding to cash in their gold need to do their homework and not take the first offer.

“Gold that is not in recognizable coin form is more difficult to value and subject to more variation in price offers,” he said. “Fortunately, one can find different local dealers and ask for offers, thus enabling comparisons. If you want to work with a more recognized dealer, subject to private arbitration, you can look for a member of the Professional Numismatists Guild.”

Whether consumers decide to sell their gold now may depend on where they think prices go from here. Market analysts appear divided on that point. 

Some believe prices can move well past the 2020 record, while others think the price hinges on what happens in Ukraine. Margaret Yang, a strategist at DailyFX, told CNBC that she believes gold will fall back to pre-crisis levels once the geopolitical dust settles.

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