Many advocates of buying gold will tell you that it’s the best way to fend off a recession. As fiat currency and equities take a nose dive, something tangible, like gold, will not only keep value, but rise in value.
Why Gold is a Solid Long Term Investment
If the 2008 financial crisis taught us anything, it’s that the ups and downs of the market are not entirely predictable, and for that reason people need to stay diversified in their investments. The United States, literally the place many people from abroad dream of living in, became wiped out after an insane economic and real estate market rally.
Smart investors with some foresight of the end to the rally made out like bandits. If you have ever seen the movie “The Big Short,” you know what I’m talking about. There are winners and losers behind every trade, and the people who bet against the rally made insane profits. Many of these people were accumulating gold and other precious metals.
Gold is practically recession-proof, and will not be suffering any losses from inflation, global crisis, and political uproars. It doesn’t have a single tie or correlation to other assets, so it’s price won’t be tied to any prices of other instruments. For this reason, it’s one of the best ways to hedge losses against an economic turndown. When financial and real estate markets start to decline, gold will go up in value, making it a perfect long-term play, which is why many people are starting to use gold in their retirement accounts.
Which Types of Gold Can You Trade?
There are many options when it comes to gold trading, with the most popular style being trading gold bullion. This is gold in the form of coins or bars. These are very popular with private investors as well as collectors when sold in the one ounce coin editions.
If you are into jewelry, beware that this usually has a lower price but that can depend on the purity as well. When the gold market surges, jewelry prices (like gold rings) will go up faster than bullion, but the contrary will also be said when a bear market comes, so it’s a catch 22 and give / take on the investment.
You can also get contracts for difference, also called CFD’s. These are almost like trading options, where you have a theoretical order to purchase or sell a defined amount of gold. The gains or losses will be divided among the investors taking place in the deal. The upside here is that you don’t have to purchase and carry the physical gold, and it’s more of a speculative play like the stock market.
If you are on the fence about investing in gold, this is a way to get in without buying too much, and there aren’t any time constraints that lock you into a long term position.
You can also trade a gold ETF. There are many exchange traded funds (ETFS) featuring gold that go up and down with the price of gold. These are typically backed by physical, actual gold. These can be converted into liquid cash and traded on the major exchanges, or in your self directed IRA account. (That’s how I do it.) There are commissions, as with any brokerage, and usually you’ll find a storage fee paid out on an annual basis, so get all the facts from your ETF of choice prior to investing.
Diversifying your assets, especially as your IRA investments are concerned, is always wise. I find that gold and other precious metals are a nice hedge that can help get past volatile market conditions. As always, do your own due diligence prior to any investment, and do what is best for your family.
Happy Trading.
About Tim Schmidt
Tim Schmidt is an Entrepreneur who has covered retirement investing since 2012. He started this website to share his expertise in using his Self-Directed IRA. Most recently he's been advising individuals to diversify into precious metals ahead of a certain recession. He invested with Goldco.