Why Invest in Gold?

When traditional markets tank, gold prices soar. If economic uncertainty is on the horizon, or geopolitical tensions rise, gold prices rise. In recent years we’ve seen a pandemic, inflation, interest rates going up, and high unemployment.

The yellow metal has maintained its enduring appeal as a safe haven asset, attracting investors during times of uncertainty.

What happened to physical gold?

The price of gold soared to record highs. Gold’s value is also influenced by the strength of the U.S. dollar against other currencies, which can impact gold prices globally. Physical precious metals are time tested investments that shine when other major asset classes lose value. Today I’ll share with you why gold investing is something I got into in 2012 and I never looked back.

Introduction to Investing in Gold

Investing in gold has long been a favored approach for those looking to diversify their portfolios and manage risk. As a precious metal with a history of retaining value, gold stands out as a reliable safe haven during times of market turbulence. According to the World Gold Council, both central banks and individual investors are steadily increasing their gold holdings, underscoring gold’s enduring appeal across the globe. Gold’s unique characteristics—scarcity, durability, and universal acceptance—make it a strategic asset for any well diversified portfolio. Demand for gold comes from a variety of sources, including investment, gold jewelry, and even technology, which helps support its value over time. Whether you’re interested in physical gold, gold mining stocks, or exchange traded funds, there are multiple ways to gain exposure to gold and benefit from its role as a stabilizing force in your investment strategy.

Understanding Gold Prices and Economic Uncertainty

Gold prices are shaped by a complex mix of economic factors, with economic uncertainty often playing a leading role. When markets are volatile or inflation and interest rates are on the rise, investors tend to flock to precious metals like gold as a safe haven. Central banks are major players in the gold market, and their buying or selling activity can significantly affect the price of gold. Supply and demand dynamics, along with world events and shifts in other commodities, also contribute to market fluctuations. It’s important for anyone looking to invest in gold to understand that while the Securities Investor Protection Corporation (SIPC) protects cash and securities in the event of a brokerage failure, it does not cover precious metals or other commodities. This means that gold investments are subject to their own unique risks and rewards, especially during periods of heightened market volatility.

Reasons to Invest in Gold

Here’s a chart showing the last 5 years of search demand for gold. Demand is up over 48%.

Gold is an Inflation Hedge

Gold, along with other precious metals, is often used as an inflation hedge. Pure gold, such as 24k gold, is especially valued by investors for its authenticity and ability to retain value during inflationary periods. We’ve all seen how our purchasing power has been lessened in a post-pandemic era. Everything we consume, from our groceries, to our electronics, to entertainment, has gone up in price.

Gold, on the other hand, has shined during these inflationary times.

Gold is a Liquid Asset

Being sold in various forms, which I delve into later in this article, makes gold highly liquid. You can go to any gold dealer and sell your physical gold, be it a coin, or a bar, for a few percentage points below the spot price.

An even easier way to purchase gold is to invest in gold mining stocks or gold etfs .

Portfolio Diversification

Whether you physical gold or exchange traded funds or other mutual funds that are backed by gold, you decrease the risk exposure in your portfolio. This potentially helps you earn better returns as precious metals have hardly any correlation with traditional investments. Unlike stocks, precious metals can not be manipulated or be associated with corporate scandal as they are a hard asset that is de-coupled from stock prices for the most part.

Safe Haven Status

When political developments and market volatility strike, the past performance of gold and other metals has secured it safe haven status. Central banks, in tandem with investors, buy gold at times of economic uncertainty to preserve capital and provide stability.

We’ve seen stock prices dip 30, 40, even 50% in a week at times of extreme volatility, but that doesn’t happen with gold prices. Gold demand rises when problems arise, making it a safe haven asset.

You have many options on how you can go about owning gold, including:

• Gold Mining Stocks (investing in gold mining companies)
• Gold Coins
• Gold Exchange traded funds
• Gold ETFs
• Gold Jewelry
• Gold Futures Contracts
• Physical Ownership – (bars, bullion, coins in tangible asset form.)

You can also add gold to your retirement account by using a gold IRA. This is a transaction that’s done with the help of one of the below vetted gold companies:

Let’s discuss some of the more popular ways people buy physical gold.

Different Ways to Buy Gold

There are several practical ways to buy gold, each catering to different investment preferences and goals. For those who value tangible assets, buying physical gold—such as bars or gold coins—offers direct ownership and the reassurance of holding a real, physical asset. Popular gold coins like the American Eagle or Canadian Maple Leaf are widely recognized and easy to trade. Investors seeking exposure to gold prices without the need for physical ownership might consider gold mining stocks, which allow you to invest in companies that extract gold from the earth, or gold-related investments like mutual funds and exchange traded funds (ETFs) that track the performance of gold or gold mining companies. For more advanced investors, gold futures provide an opportunity to speculate on the future price of gold, though these contracts come with higher risk and require a solid understanding of the market. Whether you choose to buy gold directly or through financial instruments, it’s important to align your approach with your overall investing objectives.

Difference Ways to Buy Gold

Gold Mining Stocks

These stocks are tied to companies that actually mine gold. When production rises with the price of gold, the stock markets reflect this.

Gold ETFs

This is perhaps the easiest way to get into precious metals is purchasing a gold ETF using any brokerage. Here is a list of gold ETFS you can select from.

Gold Coins

Buying gold coins won’t always directly correlate with the price of gold. It’s always best to buy popular, well-circulated coins versus collectible gold coins.

Gold Futures

Gold futures contracts give investors an option to make money on the future prices of gold.

Gold Jewelry

Most people purchase jewelry for their own vanity and style preferences. However, when you purchase anything made of gold, you’ll have the value of gold backing the purchase. You have the option of selling gold jewelry to pawn shops or to a gold dealer who can also melt the gold and pay you for the weight.

Gold Bullion

You can buy gold bars, like the pamp suisse 1 ounce gold bar, can fit easily in your hand.

Try lugging around $3,000+ of paper currency versus having this tiny piece of physical gold. I buy physical gold in this exact manner and use secure storage to protect my physical gold from world events and economic uncertainty. This form of physical ownership helps me have a well diversified portfolio.