As gold’s price falls, investors should remember these 3 things

The price of gold was seemingly on a never-ending price surge throughout most of 2024. Starting the year priced at just $2,063.73 per ounce, the precious metal soared past the $2,700 mark in late October, with many experts predicting that it could surpass $3,000, perhaps before the end of the year. But that price run came to an end in early November, and gold is now sitting under $2,600 with the possibility of further reductions significant right now.

That said, this lower entry price point offers an opportunity for investors who have yet to add gold to their portfolio. But whether you’re just getting started or already have gold as one element of a diversified portfolio, it’s important to remember a few key points, especially now that the price is declining again. Below, we’ll break down three things investors should remember with gold’s price falling.

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What to remember as gold’s price falls

A cooling gold price could cause investors to readjust their strategy but dramatic adjustments may not be needed if investors remember the following three items:

Price drops are common (and often temporary)

A drop from nearly $2,700 to under $2,600 in less than a month may feel substantial, but it’s important to take a longer view of gold. Gold was priced near $2,600 as recently as September, so the price change isn’t as dramatic as it feels. And, more importantly, price drops in the gold market are common – and often temporary. While dips are inevitable, gold tends to move in one steady upward direction. Understanding this historical dynamic, then, investors may be better served by acting now versus waiting for the price to fall much further.

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Gold is a safe-haven asset

While the price of any asset is important, it’s equally as important to remember the traditional functions of gold in a portfolio and that’s not to produce income as much as it is to be a safe-haven asset to protect other, more volatile assets. Gold is an inflation hedge known for providing a buffer when stocks, bonds and even real estate underperform. And that reputation has not been altered by a mere 5% drop in the price in recent weeks, nor is it likely to be different in the future. 

The price is unlikely to fall back to where it was

While a price drop of a few hundred dollars may tempt prospective investors to wait for a cheaper, more ideal time to buy in, the price is unlikely to fall back to exactly where it was. Inflation rose slightly in October compared to September’s rate. And, as has been seen in recent years, as inflation has risen, interest in the metal has soared and the price has (generally) risen alongside it. Waiting for this drop to bring the price back to early 2024 levels could be a mistake, then, particularly if you can invest now at a better price than what was widely available in recent weeks.

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The bottom line

A lower gold price needs to be evaluated for the pros and cons it offers investors, but it shouldn’t be overanalyzed either. After all, price drops for gold are common and often temporary. And those changes are unlikely to diminish the metal’s ability to serve as a safe-haven asset. Still, it’s unlikely that the price will fall back to where it was earlier this year or even in 2023, so investors waiting for that to happen may want to try a different strategy, particularly now before the metal has a chance to rise in price again with inflation ticking back up. Just remember to follow the traditional gold investing limit of 10% of your overall portfolio to avoid overcrowding your other income-producing assets at the same time.