Gold can be an attractive investment option for many reasons, yet its drawbacks must also be carefully considered before adding it to one’s portfolios. Also keep in mind that past performance does not guarantee future performance.
Governments sometimes overreach, so having gold as an asset is one way of protecting against this. Convertible into cash easily, and portable everywhere in the world – gold offers protection for you against this possibility.
It’s a safe haven
Gold has traditionally provided investors with a haven during periods of geopolitical unrest or economic uncertainties; however, investors must also be mindful of its present-day state in the global economy. With coronavirus pandemic spilling into an economic crisis and inflation rising across most developed nations reducing returns from debt and equity investments; gold may no longer offer investors protection as an asset during such turbulent times.
Physical gold’s low risk profile makes it an attractive asset to add as a hedge in one’s portfolio, yet its ownership costs make this difficult for some investors.
Investors should carefully consider storage fees and transaction costs when making decisions to purchase gold. Full-service gold investing programs like Hard Assets Alliance’s SMARTMETALS platform can help reduce these expenses, as they enable quick transfers of physical gold when necessary.
It’s a store of value
Gold is an internationally recognized store of value. A rare, natural resource with limited supplies, gold has durable physical properties which make it an enduring investment and provides protection from both the dollar and other global currencies.
investors often turn to physical gold when their economy becomes uncertain, such as during the coronavirus pandemic and subsequent stock market turmoil. Their investments may have seen an upswing.
Physical ownership of gold comes with various associated costs, including storage and insurance fees. Furthermore, investors need to think ahead as to their plans should they want to sell off their investment at some later date; traditional “we buy gold” businesses may not always provide an ideal solution when liquidating quickly; an exchange-traded commodity like a gold ETF that follows an index can provide easy trading with low markups and transaction fees may provide better liquidity solutions than physical gold alone.
It’s a diversifier
Gold’s low correlation to other assets makes it an ideal diversifier in an investment portfolio, helping reduce risk and volatility when other investments decline. Before investing, however, it is essential to research its costs first – storage fees, insurance premiums and transaction charges can quickly add up!
Consider how and where you plan to resell your gold, as well as any risks related to theft or natural disaster. It is generally advised to buy physical gold from government mints, precious metal dealers or jewelry stores rather than investing in collectible coins which focus more on collectors rather than investors.
Consider investing in an exchange-traded fund (ETF). These ETFs track the price of gold without needing storage or insurance; making it a convenient way to diversify your portfolio without incurring storage or insurance fees or hassles associated with physical ownership of physical gold.
It’s a hedge
Gold has long been considered an effective hedge against inflation by investors, serving as a medium of exchange for millennia while being limited in supply. Unfortunately, inflation measures have seen significant spikes while gold prices have struggled against these increases.
Investors can purchase physical gold coins or bars from government mints, precious metals dealers and jewelry stores. Investors should typically avoid collecting and gifting-oriented numismatic coins as these do not make suitable investments.
Gold can add stability to one’s portfolio when allocated as part of an overall plan; however, any investment must take into account other assets, as well as long-term goals and risk tolerance. As the economy strengthens and interest rates rise, the metal may face increasing competition from Treasuries that offer much higher yields; nevertheless, gold remains a viable protection against inflationary pressures or any economic downturns that might threaten it.
