With volatility in the stock market and uncertainty in the broader economy, some investors are looking to diversify with assets like gold. But not everyone is familiar with how gold works as an investment, particularly in terms of its trading value.
From buying gold coins to buying gold ETFs, there can be several ways to invest in gold. Depending on how you buy gold, the price can vary. In general, though, these prices reflect the underlying trading value of an ounce of gold.
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How much is gold worth?
If you’re looking to buy gold it helps to understand what you’re getting into. Here, we’ll take a look at how much gold is currently worth, its historical value, and its potential future value.
How much is gold worth now?
The spot price of gold, i.e., its trading price, is $1,759.35 per ounce, as of November 11, 2022, according to the World Gold Council. However, this spot price isn’t necessarily what you’d pay if you buy gold now.
Gold bullion, like bars and coins, often trades at a premium to the spot price, especially if they’re considered collectibles. If you bought limited edition gold coins directly from the U.S. Mint, for example, you might pay around $2,500-$2,600 per ounce.
If you bought a gold ETF that’s backed by physical gold, the share price might be much lower than the per-ounce spot price, but that’s because you’re buying a proportional share of a gold trust. The value of the gold ETF would still typically reflect the spot price of gold, with some minor variations, like if the fund held some cash.
So, as an investor, you might focus more on the percentage gain or loss of an investment in gold, based on your entry point.
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How much was gold worth a year ago?
A year ago, the spot price of gold was $1,857.90 per ounce. So, gold value has gone down by approximately 5%. In early 2022, gold prices were on the rise, but since a peak in March, gold has fallen around 14%.
To some, these returns underscore how gold doesn’t always rise during periods of inflation or other economic challenges.
“Against commonly held beliefs, gold is not an unexpected inflation or currency hedge. This is particularly well demonstrated this past year,” says Loreen Gilbert, CEO of WealthWise Financial Services.
Instead, she says, the asset serves more of a diversification purpose.
How much is gold worth historically?
From a longer-term perspective, gold is at a high value. Approximately 51 years ago, the U.S. ended the gold standard, meaning the dollar stopped being backed by an equivalent amount of gold. Since then, the gold value has gone up significantly.
At the end of 1971, gold had a spot price of $43.48 per ounce. That’s significantly less than modern prices, which at its peak in 2022 broke $2,000 per ounce, based on World Gold Council data.
After adjusting for inflation, gold has provided roughly 6X returns since the end of the gold standard.
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How much will gold be worth in the next year?
One way to estimate the projected price of gold is to look at futures contracts. CME Group data shows that December 2023 gold futures are trading at $1854.90, as of November 11, 2022, which is more than 5% higher than current prices.
The future price of gold can depend on how people value the metal itself, like for jewelry purposes, as well as investor demand for the asset.
“It is likely a function of utilitarian need over the long run and speculation over the short,” explains Gilbert.
If investor demand for gold goes up as people look to diversify their portfolios, for example, then that could influence gold prices to rise. However, notes Gilbert, gold competes with other assets for diversification, like other precious metals and now cryptocurrencies.
Overall, it’s clear that gold prices are much higher than they’ve been in the past, but there are no guarantees about what will happen in the future.
While gold can provide a source of diversification in portfolios and potentially be used by those looking to speculate on price movements, it’s not always as straightforward as saying that gold prices will go up if inflation is high, for example. Several factors can influence asset prices, so it’s important to consider the broader picture and perhaps consult with a trusted professional to decide if you want to buy gold.
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