Is Physical Gold Still a Good Investment?
Gold can be an attractive long-term investment that’s often used as a hedge against inflation, store of value, and portfolio diversifier. Unfortunately, physical gold requires expensive storage space as well as carrying the risk of impurities or theft.
Commissions charged on every transaction can quickly erode returns, while gold offers neither dividends or interest payments.
It’s a safe haven
Gold has long been considered a safe haven investment during times of geopolitical or economic unrest and rising interest rates, and inflation or market fluctuations.
Gold provides a secure means of saving wealth over time, acting as an insurance against inflation. As it cannot be altered through print runs or stock market fluctuations, this makes gold an effective and long-term way of protecting purchasing power over time.
Before making an investment decision in gold, it’s essential to carefully weigh the potential benefits and drawbacks associated with each option – physical bullion is more expensive but eliminates counterparty risk as each bar or collection of coins are directly owned by an investor.
To buy and hold gold efficiently depends entirely on your goals, portfolio and budget. No matter which option you select, diversifying your assets across multiple asset classes is key for managing risk effectively.
It’s a hedge against inflation
Gold can offer protection against inflation because its costs tend to be less than fiat currency. As inflation has diminished purchasing power, more currency must be exchanged in order to purchase the same amount of gold.
Gold investments have long been seen as a safe haven against economic uncertainty. To make sure your portfolio includes physical gold investments, consulting financial advisors is often recommended.
Physical gold tends to perform well when stock markets decline, making it an effective diversifier and protection against recession or crash risks. Unfortunately, buying and selling gold can be time-consuming for investors without an abundance of funds available for transactions; additionally, finding a trustworthy dealer who will offer competitive prices may prove challenging as well as storage fees should you choose either an in-home option or third-party storage provider for their gold storage needs.
It’s a store of value
Gold is widely considered to be a store of value and tends to move inversely with other assets like stocks and real estate. Deciding between investing in physical or paper gold depends on your financial goals and risk tolerance, so make your choice accordingly.
If inflation or economic uncertainty is an issue for you, physical gold could provide a smart way to hedge against it by maintaining its value over time and being one of few investments that can easily be liquidated for cash.
Be mindful when purchasing physical gold that it comes with significant manufacturing, shipping and storage costs as well as insurance costs that don’t usually fall under homeowners’ policies – which could seriously detract from your returns. As an alternative to physical gold investments, ETFs may be less expensive but still be subject to unexpected transaction fees that might hinder returns.
It’s a diversifier
Many investors look at physical gold as an asset class to diversify their portfolios, and its low correlation with equities makes it an attractive option for periods of market instability.
Gold has historically had less than an 0.88 correlation to stocks over a one-year period.1
Gold’s diversifying properties also make it attractive to central banks that wish to add foreign exchange reserves – particularly considering recent Western financial sanctions against Russia.
Before you decide to include gold as part of your portfolio, make sure you do it for sound financial reasons and not out of fear of market volatility. While no asset class is risk-free when investing, maintaining target asset allocation while mitigating risks with gold can help ensure success and achieve the optimal outcomes.