Why invest in Gold

Gold has a rich cultural history spanning continents and centuries. As societies have relied on the yellow metal for value and beauty, its use – and price – has continued to rise.

Gold is the metal we turn to when currencies fail and economies falter, cementing its status as insurance against tough times. As an investor, buying into Gold can be a lucrative or disappointing endeavor. It all depends on the market, your knowledge, and your expectations.

Gold is somewhat unique in that it provides multiple avenues for Investment. While each method of owning Gold bears its own advantages and disadvantages, each is well worth considering. Let’s consider now ways of investing in Gold for beginners or old pros.

One common form of Gold Investment historically is Bullion. Bullion provides a chance to get your hands on the physical Gold itself. On the other hand, it carries unique storage and insurance costs, as well as theft risks. (Plus, Gold itself doesn’t generate interest payments.)

An increasingly popular method of Gold Investment is Gold IRAs. These unique instruments allow investors to weave Gold into their lifelong retirement strategy. Sure, you won’t directly hold the metal yourself. But your Portfolio will still benefit from long-term appreciation and the ability of Gold to hold its value when the market sours.

Bear in mind that most experts recommend limiting your Precious metals Investments to no more than 10% of your total Portfolio. Moderating your Investment ensures that other segments of your Portfolio have plenty of room to grow while also capitalizing on Gold’s stability.

• Potentially poor returns. Some forms of Gold, particularly jewelry or lower-weight Bullion, tends to be more expensive due to sellers padding their pockets. It’s possible that you’ll barely breakeven – or even lose money – when it’s time to sell. 

• Poor income potential. While Gold can appreciate over time, the metal itself doesn’t generate interest just by existing. If you want to increase your returns, you’ll have to invest in non-physical Gold like Stocks or futures. 

Consider that the Inflation-adjusted value of an ounce of Gold rose from around $371 in September 1922 to $1,660 in September 2022. At the same time, the value of the dollar dropped dramatically due to Inflation. Though these gains don’t outpace the stock market’s potential, holding some Gold can maintain or increase the value of your money by comparison.

Plus, you can always find a buyer for Gold (even if your returns aren’t as high as you’d hoped).

Unlike its Silver counterpart, Gold is rarer, more difficult to mine, and enjoys fewer industrial uses (comparatively). In fact, the total amount of Gold ever discovered comes out to just 244,000 metric tons, compared to 1.74 million metric tons of Silver.

Due to this enormous supply gap, Gold tends to cling to its value more strongly than other Precious metals. And in periods where Gold mining declines, the asset’s price often soars in response to further constraints.

For example, many Chinese people consider Gold a traditional form of saving, and so desire it for their Portfolios. And India’s wedding season is infamous for increasing global Gold demand as the need for jewelry arises.

But Gold’s demand extends beyond culture. Many investors consider commodities, including Gold, investable assets year-round. For others, Gold demand rises and ebbs with its price, as well as financial and geopolitical situations.

Gold’s ability to maintain or increase its price over time makes the Precious metal a common hedge against Inflation. (Inflation is when the value of a dollar erodes over time due to the natural increase in prices.)

As Inflation rises, Gold typically appreciates, often buoyed by widespread investor interest in the Precious metal. The Gold spike in the 1970s represents a prime example of rising Precious metal prices – both Gold and Silver – in the midst of soaring Inflation.

Inflation aside, the value of the U.S. dollar can also fall relative to other currencies. When the dollar weakens, investors tend to flock to the security that Gold promises, which results in increased prices.

One example of Gold’s security in the face of a weakening U.S. dollar occurred in the early 2000s. As the dollar fell in the years ahead of the Great Recession, the price of Gold nearly tripled between 1998 and 2008.

Gold doesn’t just retain its value in the face of financial uncertainty, but global and political uncertainty, too. It’s often considered the “crisis commodity” due to its history of people relying on Gold’s relative safety. When tensions arise, the Precious metal can even outperform other Investments, depending on the location and cause of the geopolitical uncertainty. 

Current economic conditions and geopolitical events are causing many investors to consider this question: “Is it good to invest in Gold today?” If you are wondering, “Why invest in Gold”, let’s recap the points we have covered in this short article.

Gold makes a valuable addition to any investor’s Portfolio, though only you can decide whether its relatively slow growth fits your long-term strategy.