The world is experiencing unsettling times. With global unrest, people often turn to gold bullion and coins as more stable investments than cash.
Economic analysts claim that the pandemic’s effects might put a significant dent in the savings accounts of citizens worldwide. The stock market is starting to crash, currencies have been devalued, the housing market is on the decline, and we’re entering into a recession.
What can investors do?
Many experts suggest that it is time to invest in gold because of the recession.
A precious metal like gold comes in physical forms, such as coins. However, we can also add it to our IRAs to create a more diversified portfolio. Regardless, it can protect investors from economic collapse.
Gold is considered a protected form of wealth and will help you keep a grip on reality when economic conditions go south. You will be protected whether you choose an investment option or physical forms.
For this reason, gold IRA investments are RED HOT.
I personally jumped in and diversified myself. Check out the video summary to see who I invested with and why.
Are you an investor looking at gold? Most experts claim that it’s a wise decision for anyone’s investment portfolio. However, if you’re unsure of this financial asset, it’s wise to consider the 10 reasons to invest in gold. Let’s look deeper at them to learn more about gold’s rich history.
10 Reasons to Invest in Gold
The global economy is in a slump, and it keeps getting worse. Therefore, more people want to find safe haven asset classes, and that often means physical gold. We’ll focus on the top reasons to consider precious metals below:
1. Easy Storage, Access, and Liquidity
Precious metals, such as gold bullion or coins, are portable and tangible assets. Likewise, they’re confidential, easy to store, and liquid (easy to sell).
You can transport gold with ease, so it’s quickly moved when needed. Plus, gold is a liquid asset because it features a low unit value,
and global gold trading is effective. For example, you purchase a small amount of gold, but you don’t affect the market price. Since it has a strong global demand, buyers are always available.
On top of it all, gold is easily melted or traded in any form. Therefore, it’s suitable for commodities such as jewelry.
Unlike other options, such as oil, gold won’t corrode or degrade. Plus, it has a long shelf life, and you don’t need special storage conditions to keep it safe.
Likewise, people can buy physical gold in small amounts, so it’s ideal if you wish to sell or buy a little bit at a time. Since you can physically store it yourself, you also have more control over your money, which can lead to feeling more confident.
2. Tangible Asset Class (Gold Coins, Bullion, Ingots, and More)
Gold is the physical representation of wealth, and it’s often passed down through the generations in families.
You can store it in many physical forms, such as:
Overall, gold is great compared to other asset classes because it’s difficult to produce, durable, and rare. The metal also has an inherent value, so you can store your wealth easily and pass it on to the next generation.
When you accumulate gold, you build up a pool of assets you can give to family members. That’s not possible with gold ETFs.
Though gold exchange traded funds are convenient for some and can be a stepping stone to help you invest in gold, they do have drawbacks.
For example, you don’t own the physical gold itself. It’s stored in a vault, and you receive a certificate claiming that you’re entitled to it. However, if there’s a problem with the company or vault, you might not get it back. ETFs are also subject to forced sales and government seizures in a crisis.
Gold is a safe-haven asset, and most people buy it when they feel turmoil in the markets. This drives up the prices for gold ETFs, so they’re less attractive than physical gold investments.
3. Global Currency
With gold, you have a global currency that isn’t tied to a specific government or country. In fact, most countries worldwide accept it as part of the major currencies for exchanging goods.
Gold is abundant, meaning you can create gold coins from it, but it’s also rare enough that it’s difficult to produce. Historically, this means it’s an ideal form of currency.
The World Gold Council conducted a survey that showed about 25 percent of global central banks planned to purchase gold in 2023. Even governments and banks understand that gold has value, and that’s primarily because people believe it.
Governments often control the value of gold by stockpiling it or setting high prices. However, the market will decide what it’s worth. That’s why you find gold prices so volatile; they’re based on what people choose to pay for them.
4. Intrinsic Value
People have used gold as currency for many centuries. Silver and gold are some of the most trusted assets in the world. In fact, precious metals are timeless and universally admired with intrinsic value because of these reasons:
Doesn’t tarnish or corrode
Has a low reactivity to other metals and elements
Has a low melting point to be turned into jewelry and coins
Is a conductor of electricity, making it ideal for electronic devices
Features a unique color that won’t fade and is sought after worldwide
When you wish to convert your gold into cash, you can visit a dealer, jeweler, or bank to trade it in. Though the gold price might fluctuate, you’ll know that you could easily swap it for another asset because it has intrinsic value and is a scarce resource.
5. Gold Prices Remain Similar During Economic Uncertainty
Gold’s value often rises during times of economic and political uncertainty. Why? It happens because it’s a valuable resource and not tied to an economy’s performance. Therefore, it’s one of the top safe-haven asset classes when inflation hits.
Whenever the stock markets are volatile, investors search for a stable investment opportunity. Gold prices tend to go higher because people flock to this precious metal to protect their money. Overall, gold is a reliable investment because it’s scarce and has inherent value.
Likewise, gold isn’t as volatile as other investments, so it’s a stable option for people who wish to protect their money. Therefore, physical gold works well for retirement savers who want to offset their losses during economic stresses and have more confidence in their futures.
6. Inflation-Proof Precious Metal
The gold price you see isn’t subjected to inflation like other currency options. In fact, it’s resistant because it is a finite resource. There is only a specific amount in the world. Supply and demand keep prices stable because people want to buy it for its value. Therefore, it’s a great investment because it will always retain its purchasing power.
When goods and services increase their prices, the currency’s value decreases. If you save money, it will get you less now than before inflation happened.
However, gold won’t lose its value during inflation periods. In fact, it will likely increase in value. Buying gold during these times will protect your investment and ensure that it’s worth something when prices go down again.
7. Inversely Related to Stocks and Bonds
Stock market volatility is something many investors fear, and gold is an asset that isn’t correlated with that area.
Gold prices work inversely with the stock market. When stocks do well, gold prices will go down because the investors are willing to invest in other areas than gold. However, when the market does badly, the gold price goes up because investors want to sell stocks and have a safer gold investment.
Overall, if you buy gold, it’s seen as an inflation hedge during economic instability. That’s why it’s not positively correlated with the stock markets. Those who wish to minimize risks should look at it as a good investment.
8. Financial Privacy
Those who want to protect their financial privacy should look to gold. It’s not tied to financial institutions or countries, so it’s harder for governments to track holdings.
Likewise, if you buy physical gold, you can easily store it safely outside of the banking system. No one can seize or freeze your assets. Plus, gold is a good investment when it comes to privacy because it’s not as volatile as other investments and has been historically stable in value.
About 86 percent of the global central banks are looking into developing their own digital currencies. The Federal Reserve has done this, but China also launched “yuan,” a digital currency, last year. Europe now has the EBA.
While digital money has some benefits, most people question the motives behind pushing to go digital. One downside is that governments will track their citizens’ spending habits.
Owning gold gives people an asset that’s outside the banking and financial systems, so it’s more private. If you’re one who worries about government control, it makes sense to hold gold outside of your retirement account and banking institution.
9. Asset Diversification
Gold is often used for portfolio diversification as retirement savings or investments.
Good diversification is crucial to reducing the risk of stock investments. When someone spreads their money throughout different sectors, they’re minimizing risk. If one investment does poorly, the second one might offset some of those losses.
Diversification is achieved by investing in many asset types, such as real estate, bonds, and stocks. You spread the money around, which protects you in case one thing goes down. However, there’s no guarantee that your investments will perform well all the time. Still, a diversified portfolio will minimize risks in most cases while maximizing potential returns.
Throughout the last few years, gold prices have increased significantly. Therefore, owning gold is a great investment choice for people who wish to diversify their portfolios. Overall, gold is safe because it’s not tied to economic indicators and the stock markets.
Likewise, gold is durable, you can store it in many locations, it’s been used as currency and still is, and it’s a valuable commodity.
10. Keeps Your Purchasing Power (Hedge Against Inflation)
What would you do during an economic collapse? Purchasing gold now can help you avoid problems later. It isn’t flashy, but it has a power all its own. In most cases, it remains steady when other investments lose value quickly because of hyperinflation.
Think back to the 1970s, which were hard times for many people. Inflation rates averaged about 5 percent each year, skyrocketing to over 13 percent by 1980. However, that decade saw the value of gold go from $35 to more than $850.
We should be aware that gold typically performs well during inflationary periods, but that doesn’t mean it always will. However, stocks have wiped out trillions of dollars in retirement savings already, so it’s worth considering alternative investment sources.
Here are a few factors that affect the US dollar’s value:
Inflation – An inflation rate of just three percent could significantly affect the purchasing power of an investor. Right now, inflation is at 7.5 percent. If it stayed like that for 20 or so years, you’d need over $2 million in savings to equal what $500,000 would get you today.
QE (Quantitative Easing) – During the past 15 years, the monetary policy of the US has been accommodative. The federal government grew its balance sheets to $8.5 trillion. Likewise, the M2 money supply went up to 36 percent in three years. Since inflation has come about, the central banks are changing courses and tapering their asset purchases.
Government spending – The US government’s spending is out of control, and it’s now in a deficit. This means that the Federal Reserve keeps interest rates low and purchases that debt. In fact, it owns about 30 percent of the nation’s debt. Since the government just prints out new money, growing debt is a concern for foreign markets and may further weaken the US dollar.
Reasons to Buy Gold - The Bottom Line
Gold is still the best option for your investment portfolio, and many people turn to it in times of crisis. It’s easy to store and access, performs well in financial uncertainty, has intrinsic value, and helps with inflation.
Whether you choose gold bars, bullion, or coins, you have privacy and diversification. If you want an asset that’s not tied to the government and can be used as currency, it might be time to buy gold.