This short guide to gold investing covers two separate sections. The first covers the whys in should you invest in gold, and the second covers the various ways that you can invest in gold as a precious metal.
We’ll begin, traditionally, with the whys of investing in gold.
The essential whys of gold investing
Gold is essentially considered an alternate hedge when the dollar is weak in the world market, as well as a hedge against inflation.
Companies like Monetary Gold can help you understand all of this. Any time you want more information, see any Monetary Gold reviews before you move forward.
Now consider the economic market in 2022. According to news and economic forums such as
Moneweek.com the US dollar is at its highest level ever, with the dollar now equal to the Euro, and exceeding the Yen by over 20 percent.
According to Moneyweek, this is due to the Fed successfully clamping down more than any other currency in the world.
However, at the same time, gold is a traditional hedge against inflation, and as most of you know, the inflation rate is now currently the highest in many years.
So worrisome is the inflation rate that most people worry that the Fed’s rapidly raising interest rates will cause a monetary recession and gold has almost always
gone up quite a bit during a recession.
Between the two, the strength of the dollar and rising inflation, the dollar may return to a more flattened strength, while the price of gold will very likely go up in the
next year or two.
Meanwhile, most investment gurus predict that the price of stocks will drop as much as 20 percent if the US goes into a recession. Naturally, before a recession hits, many investors will flock to save investments like Treasury Bonds, but the question is will
such investments offer enough yield for many investors to depend too much on bonds.
Therefore, now, more than ever, investment gurus are suggesting that at least 10 percent of your investment portfolio go into gold.
At least through 2024, gold is seen to be rising from its current spot price of $1707 to as much as $2050 or more.
In fact, investing in gold is now considered a safe investment all the way through 2031.
This is not to say that you should put your entire investment portfolio in gold. Typically, recessions last around 17 months in the US, and then the economy, including the stock market comes bounding back.
And when the US has a strong economy, stocks tend to outpace the growth as compared to gold by as much as 3 to 1.
As a result, sometimes at the tail end of 2023, or 2024 at the latest, many analysts predict that the stock market will return to its traditional strength and should be a better investment than gold.
Therefore, most analysts say that while gold is a good hedge in troublesome economies, not to go too gold crazy. While some analysts are cautious and recommend only 5 to 10 percent of your portfolio be in gold, even those who love gold as an investment suggest that no more than 20 percent of your portfolio, max, should be in gold.
Ways to Invest in gold
There are more ways to skin a cat goes the old adage, and just so, there are several ways to buy gold.
Two of the most popular ways are to buy physical gold in the way of either buying gold bullion or buying gold coins.
The problem here is where to keep your physical gold. If you buy gold bullion you will get the best price for it, but if you have a substantial investment, then most opt to have their physical gold stored in a gold depository.
The question is what is the purpose of your investment in gold? If you believe that the economy may fall into a deep depression and just like in post-war Germany it would take a wheelbarrow full of US dollars to buy a loaf of bread, then you may want to invest in
gold coins.
One-ounce gold coins would indeed come in handy if the economy totally collapsed, and there are a number of 1-ounce gold coins available for purchase.
The problem with buying gold coins is there is typically a markup fee of around 5 to 8 percent over the spot price. However, if the economy ever plunged into a Mad-Max situation, gold coins would certainly be more attractive than even bullion as a medium of exchange.
If however, you are investing in gold as a hedge against the value of paper dollars and believe the economy and environment will stay civilized for decades, then there are alternatives to actually owning physical gold.
There are mutual funds and exchange-traded funds that allow you to trade in the price of gold without having the burden of the physical assets, as well as investing in mining companies that hunt for gold.
The bottom line
Investing in gold makes sense up to a point. During the next couple of years of the economy, gold will certainly prove to be a hedge for many, but to be a real hedge you probably need to invest 20 percent of your portfolio in gold.
After 2024 however, or sooner if a recession comes and goes, you might want to shift much of that stored gold investment back into traditional stocks or mutual funds.