Is Gold A Good Investment? A Complete Guide On How To Invest In Gold
Is Gold A Good Investment? A Complete Guide On How To Invest In Gold
Gold has been the world’s currency of choice since the time of ancient civilizations. This natural resource has always captured our imagination and is universally seen as an indicator of wealth and prosperity. Although it’s no longer a primary form of currency, gold is still as important, as it was years ago.
Today, if you want to preserve your wealth over a long time and ensure that your financial health stays in tip top shape, gold is a perfect option for you. It is highly liquid, yet scarce and has a low correlation with other asset classes hence can play a fundamental role in any investment portfolio.
That said, is gold a good investment in 2020? Well, this article will help you determine if gold is good for investment and retirement portfolios, and delve on how to invest in gold for beginners.
Let’s dive in.
Is Buying Gold a Good Investment?
If you're wondering is buying gold a good investment, here are some solid reasons why you should have gold in your investment and retirement portfolios.
1. Gold Has Maintained Its Value
Gold has held onto its value over the years. People have always looked at it as a tool to preserve wealth and pass it on from one generation to another. There might be no other asset in the world that has had the universal appeal as gold. It, therefore, stands as a safe haven that is fairly immune to macroeconomic and geopolitical risks.
2. Hedge Against Inflation
In an inflationary environment, fiat currencies become less valuable. Their purchasing power declines as inflation increases. However, gold tends to hold its value and is rarely affected by inflation. Therefore, if you’re looking for a long-term asset to add to your portfolio, gold could be a good option to hold your money without losing its value due to inflation.
3. Excellent For Portfolio Diversification
Gold has a low correlation with all other major assets. It is, therefore, an excellent portfolio diversification as it tends to do fairly well even when other investments are performing poorly. Gold can, therefore, protect your portfolio from volatility because it is minimally affected by factors that affect the returns of most asset classes. For instance, in the last 5 years, data have shown that gold prices tend to move independently from those of S&P 500 assets.
4. High Liquidity
Gold has excellent liquidity since bullion markets trade continuously throughout the world. This means that you can sell your bullion instantly on the live gold market. Here are some few reasons why gold is such as liquid asset:
- Both small and big investors can participate in the gold market. You can start by just buying a few coins or bars.
- Average daily volumes of gold traded are very high
- Gold prices can be accessed 24/7
On top of its liquidity, gold as an investment aims to provide you with a more diversified portfolio and downside protection.
5. Gold Is A Tangible Asset
If you buy gold bars, coins or bullions, you can hold them in your hand. This is something you can’t do with equally liquid assets such as stocks. By being tangible, gold offers a unique sense of security to the investor and reduces the risk of getting scammed.
6. There Is A Supply Constraint
One of the reasons why gold is so highly valued is because of its scarcity and rarity. Today, we only have about 54,000 metric tons of gold that are yet to be mined, which is less than the gold which is already in circulation. There is an even bigger issue: it is becoming more difficult and more expensive to mine an ounce of gold. This supply and demand imbalance is likely to push the value of physical gold upwards in the coming years.
Now, back to our question. Is gold a good investment for retirement? Well, from the above reasons, gold measures up well as an investment asset, especially for retirement. It is a solid investment tool for people looking to pass down their wealth to future generations in a way that doesn’t lose value.
Gold holds up well in a recession, geopolitical uncertainty, inflation, and currency depreciation. It, therefore, makes sense to invest in gold as protection from a market decline.
Now that you know a little more about why buying gold is a good investment, how can you start investing in it?
How to Invest In Gold for Beginners
As a means of diversifying your portfolio, gold investment can be extremely useful. There are several ways you can invest in gold. If you’re a beginner, here are a few ways you can get started:
- Physical gold (e.g., gold coins)
- Mining stocks
- Gold Mutual Funds and exchange-traded funds (ETFs)
- Future Contracts
1. Buy Physical Gold
Physical gold is a good way to ensure wealth preservation. If you’re just getting started, you can either choose to buy gold jewelry, coins or bullion. Investment-Grade Gold bullion is either a non-collectible bar or a coin of high-purity gold (up to 99.999%) that has a universal purchasing power and an excellent store of value.
Unlike gold coins that have artistic impressions and a value tied to it, bullion does not have any artistic value. Since very little fabrication is needed when fabricating bullion bars and coins, its price is almost always tagged to the prevailing gold spot price. The following are some of the many gold bullion bars you’ll find available:
- PAMP Suisse Fortuna Gold Bars
- Sunshine Mint Gold Bars
- Credit Suisse Gold Bars
- RMC Gold Bars
Small and first-time investors should consider investing in both gold bars and coins. However, coins are a popular starting point for lower value investments.
Surprisingly, gold coins are usually quite expensive due to their intrinsic artistic value. Also, the cost of turning raw gold into a coin is usually passed on to the consumer hence their premium value. They are, however, more popular than gold bullions especially if they have stamped guarantees backed by stable governments.
Investing in gold coins can be hugely advantageous because:
- Their prices are conveniently available
- They provide a portfolio’s quality, liquidity, security, and longevity.
- It is easy to find reputable dealers in various cities without much hassle.
- They are minted in smaller sizes hence more convenient for small investors.
Some of the most popular numismatic coins are issued by various government mints across the globe. They include:
- U.S. Gold Eagle
- Chinese Panda
- Canadian Maple Leaf
- American Buffalo 1-Ounce Gold Coin
- British Britannia 1-Ounce Gold Coin
- South African Krugerrand 1-Ounce Gold Coin
- Austrian Philharmonic 1-Ounce Gold Coin
- Australian Gold Kangaroo
- European Gold Sovereign Coins
- Mexican Gold Libertad
- South Korean Gold Coins
- Ukrainian Gold Coins
Remember to only buy gold coins from reputable dealers in manageable quantities so that you can liquidate them easily whenever need be. Also, be sure to store your gold properly to protect your assets. You can either use a safe at home or a bank deposit box to store it.
2. Invest In Gold Mining Companies Through Mining Stocks
Investing through the stocks of companies that either mine gold or are involved in gold exploration is also a good way to leverage your investment and gain more exposure to gold investments. Buying stocks ensures that you avoid paying hefty premiums that crop up when buying physical gold. You also don’t need to worry about storage and insurance costs.
Mining stocks are highly volatile since they depend on the performance of the company. Mining stocks give you the opportunity to benefit from the gold mining operations. They have the potential for capital appreciation and also offer decent dividends to investors.
Is gold a good investment for retirement? Absolutely. Mining stocks are a good investment option for retirement that will not only protect your wealth but also gives you an opportunity to earn dividends regularly. They can be easily traded, hence you can quickly cash in your investment.
3. Gold Mutual Funds And Exchange-Traded Funds (ETFs)
Buying shares of gold in funds such as exchange-traded notes (ETNs) and exchange-traded funds (ETFs) is a safe way of getting involved with gold. ETFs are highly liquid hence can be sold whenever the need arises. They can be purchased and sold just like stocks in an IRA or brokerage account.
A gold oriented ETF has the following advantages:
- Diversification among different companies
- Low cost and low minimum investment required
- No individual company research needed.
- Ease of ownership in a brokerage account or an IRA
4. Buy Gold Futures
These are standardized contracts that are traded on organized exchanges. Futures are traded in contracts and represent a predetermined amount of gold. They are more suitable for more experienced traders. To start trading your gold futures, you’ll first need to open an account with a reputable brokerage firm.
Do Gold Coins Go Up In Value?
Having gone through the various ways you can invest in gold, you could be wondering: do gold coins go up in value? Well, there is no silver bullet answer to this. However, generally speaking, gold coins usually go up in value especially if they were bought from trusted government mints around the world.
The value of gold coins is usually pegged on two factors. The purity and value of the gold that has been used to fabricate in and its numismatic value. It is, therefore, not surprising to find a 1-ounce gold coin fetching more than 1-ounce gold bullion. Some coins will attract premium prices due to the numismatic value of their artistic impression.
There are several factors that can push the value of gold coins upwards:
- Age: The age of a coin from its mint date usually have an impact on its value. Older numismatic coins are more valuable than coins produced today.
- Rarity: Rarity of the coin is a key driver to their value. Some gold coins such as those from medieval times have extremely high value since they are hard to find.
- Metal Amount: If you have a bullion coin with high purity levels, its value will increase with increasing gold value. You can sell such as coin later at a premium.
However, like any other investment, you need to consider the possibility of the coin losing its value, especially if its demand falls over time. As a rule of thumb, you should buy coins primarily to preserve your wealth and not necessarily as a tool to trade at a later date.
Is Gold a Good Investment In 2020?
We’ve been having clients asking is gold a good investment in 2020. The answer is an absolute YES! Gold is a good investment tool in 2020. First and foremost, gold is not like other investments. It is the safest and most stable store of value known to man. It is also universal money that never fails. Gold transcends geopolitical borders. Unlike other asset classes, gold requires no counterparty to performance.
This year, gold investment has been at an all-time high due to various geopolitical factors. The US-Iran tension, for instance, is driving a spike in gold prices. Many people are also finding a gold investment to be a more viable option than having money lying in banks.
Therefore, having some portion of your investment and retirement portfolio in gold this year is a smart move. You’ll be hedging your investment from risky situations. A 5-20% investment in gold can be a good risk-reducing strategy for your existing investment portfolio.
The Bottom Line?
Looking for how to invest in gold for beginners? Is gold a good investment for retirement? If you had any of these concerns, we are sure that you now understand why gold is a unique investment asset. Besides being highly liquid and scarce, gold offers impressive downside protection and positive performance to any long term investment. Therefore, adding gold to your investment and retirement portfolio can give you enhanced risk-adjusted returns.
If you’re a beginner considering investing in gold, talk to us today for guidance on how you can start protecting your wealth by investing in this yellow metal. You can also scroll through our catalog to discover some of the world's most valuable gold coins and rarities.
If you’re interested in buying gold, you can explore the collection at IPM here. IPM also offers a variety of gold coins and rare gold collections. Feel free to learn more about rare coins and precious metals by checking out our other unique blog posts, including Green Pennies & Cleaning Old Coins, The Most Valuable Coins In Circulation, & Our Guide to Rare Modern Coins.