From an investing or savings perspective, gold has historically been a good safety net option for preserving or passing on wealth. This precious metal is considered a stable investment with a wide range of benefits, such as liquidity, safety, and portability. However, gold lacks income, market factors can affect its price, and there are some ethical considerations.
Before investing in gold, it’s essential to consider gold investments’ pros and cons to decide whether it makes sense for you. If yes, you’ll want to understand the different options for purchasing gold as part of your portfolio.
What are the pros of investing in gold?
Low-interest rates don’t drag gold down
Gold can be an excellent way to protect your wealth during economic uncertainty. It has historically been a safe-haven asset, and it can often outperform other investments in times of market volatility. This is because prices tend to remain steady over long periods, making it a good hedge against inflation and economic downturns.
Gold can enjoy long-term stability
Gold does not experience the same forces as other assets, such as stocks, making it a good hedge against volatility. Additionally, gold has the potential to appreciate over time, making it a lucrative investment option. You can generally rely on it to preserve or increase its value even during economic uncertainty.
Gold is easy to liquidate
Gold is highly liquid and can easily be converted into cash if required. Because gold is almost always in demand, buyers will consistently be willing to pay a premium price. “In some states, certain gold and silver coins can be used as currency, meaning it’s hypothetically as liquid as cash.“
Gold provides portfolio diversification
Finally, buying gold is a tangible way to diversify your portfolio and reduce risk. This is because of its lower risk of volatility during economic instability and lack of connection to the general market performance.
What are the cons of investing in gold?
Buying gold is a way to save money, but it’s not without its drawbacks. Investing in gold can be expensive, especially during times of high demand. It is also volatile. You may have to pay additional fees for storage and insurance. It may also take a long time to profit from gold investments.
The ethical concerns of buying gold
There are also ethical concerns about buying gold to consider. Gold mining usually involves environmental destruction, exploitation of workers, and unfair labor practices. In addition, gold is often mined in high-conflict areas. It has been a funding source for groups engaged in conflict and terrorism.
How do I buy gold?
While physical gold can be a good investment, it’s not the only option. Investors should be aware of price manipulation in gold markets and research the best ways and reputable places to buy gold. A professional financial advisor can advise you on current investment options.
Gold coins or bars
Gold bullion is physical gold of high value, usually in coins or bars. These gold coins and bars are typically available from banks, mints, coin shops, online dealers, and some jewelry stores. Gold coins are easily carried and have a numismatic value, meaning the price may increase based on quality, variety, and demand. Gold bars are convenient for storage but are more expensive than coins. Both can easily pass down to beneficiaries.
Gold ETFs
Gold ETFs provide investors with opportunities for gold holdings in securities and trade. These options often offer low buy-ins, as little as one share, and low annual costs. Plus, there is no storage needed. However, ETFs can expose investors to liquidity-related risks, high capital gains taxes, and fees.
Gold futures
Gold Futures “are contracts that are traded on exchanges in which a buyer agrees to purchase a specific quantity of the commodity at a predetermined price at a date in the future.” Unlike Gold ETFs, there are no management fees, and they won’t be sold without investor approval. Investors can easily sell their gold commodities when needed or when prices are high.
Consider these options for gold investment. Remember, a balanced investment decision requires thorough market research and careful consideration of all factors.
