Why Invest in Gold and What Are Your Options?
Gold is a valuable asset. This includes both gold soft assets and gold hard assets.
One example of a gold hard asset is gold bullion. Another example of a gold hard asset is a gold exchange-traded fund (ETF). Here’s a look at these investment options and why you should invest in gold in the first place.
Why Invest in Gold?
Before we get into your gold investment options, however, we should look at why you would want to put your money in gold in the first place.
Gold is considered a safe-haven asset, meaning an asset that, during unstable market times, tends to hold or increase in value. In both the distant and recent past, this has proven true again and again.
Seriously, over the last five thousand years, gold’s purchasing power has remained remarkably consistent.
In recent history, gold performed as a safe haven asset:
- After the dot-com bubble burst.
- During the 2008 financial crisis
- During the COVID-19 pandemic, especially the earlier days
- In fact, in August 2020, the price of gold reached USD 2,070.50 per ounce—an all-time high
More:
- Governments or central banks do not back gold; instead, it’s backed by its merit
- Gold is a global money; it’s not a paper currency, which is prone to inflation
- Gold has intrinsic value
Why Include Gold Bullion in Your Investment Portfolio?
The goal when building a financial portfolio is to minimize potential risks and maximize potential gains. When you add gold to your financial portfolio, you can:
- Diversify your portfolio
- Protect your portfolio from the highs and lows of unstable markets
- Hedge your portfolio against inflation
Depending on your risk tolerance, financial experts recommend that you include 5% to 10% of gold assets in your portfolio.
Gold Bullion: A Hard Asset
Gold bullion is one of the most common gold hard assets to invest in. It’s also one of the most straightforward. That’s why so many beginning investors invest in gold bullion rather than other gold assets.
Gold bullion is officially recognized as 99.5% gold and comes in the form of 1-ounce coins and bars held as reserves at central banks and financial institutions. Gold bullion is typically spot priced by the ounce.
The goal when buying 1 oz of gold bullion bars or coins is to do so when you can get it as close to the spot price as you can. You do this to maximize your eventual gains and minimize your premiums.
You can sell your gold coins for cash. You can sell your gold bars for cash. Just make sure you sell at the right time.
Bottom Line
There are many potential benefits to investing your money in gold, either as a hard asset or as a soft asset—or both.
If you’re interested in buying gold bullion, a hard asset, it’s simple: head over to your local bullion dealer. Just be sure to do your research first, so you know which dealer is most likely to give you a fair market price.
This article has been published in accordance with Socialnomics’ disclosure policy.
