Must-know: A guide to investing in gold

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Sep. 22 2014, Published 11:13 a.m. ET

Investing in gold

Investing in gold is complex. It’s challenging because it’s hard to predict gold prices in the future. Previous Fed chairman Ben Bernanke said that “nobody really understands gold prices and I don’t pretend to really understand them either.” However, there are many indicators that investors can track. The indicators help to determine the direction that gold prices will take.

In this series, we’ll discuss these drivers and how they impact gold prices. First, we’ll explore the relationship between gold and U.S. real interest rates. Then we’ll talk about other factors that impact gold prices—like inflation.

The U.S.dollar is the world’s reserve currency. We’ll analyze how a change in its value—in relation to other currencies—impacts gold. Gold was used to back currency until 1971. We’ll also talk about U.S. debt. Over time, a change in debt’s composition affects gold prices.

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We’ll also analyse how the central banks’ actions and policies impact gold prices. On the physical demand side, we’ll talk about gold’s largest consumers—China and India. You’ll learn how the changing dynamics in these countries will impact future gold demand. This will also impact gold prices. Click here to learn why gold is important in India.

Finally, we’ll talk about key catalysts to watch out for when investing in gold. You’ll learn how gold could diversify your portfolio.

Most of the major miners’ stocks like Goldcorp Inc. (GG), Barrick Gold Corp. (ABX), Newmont Mining Corporation (NEM), Agnico-Eagle Mines (AEM), Yamana Gold (or AUY), and exchange-traded funds (or ETFs) like the SPDR Gold Shares (GLD) and the Gold Miners Index (GDX) have a strong association with shifts in gold prices.

As a result, it’s important to understand gold price drivers. We’ll discuss this throughout the series.

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