For most of mankind’s history, gold has been valuable. It is one of the most logical options for exchanging goods and services.
Gold’s value stems from it being plentiful while simultaneously being scarce. Enough gold has been found so that coins can be minted. However, finding gold is hard enough that only a small group of people can produce it.
Gold has intrinsic value. It does not corrode. It has an attractive appearance caused by the atoms in gold being heavier and the electrons moving faster, which causes it to absorb light. It is malleable. It is an excellent conductor of electricity and is strong enough to be used in certain tools. Therefore, economies have always fallen back on gold when all other forms of currency have failed.
Why Should You Invest in Gold?
Gold is respected around the world. Economies place a value on gold, and this perpetuates its worth. This alone is a good reason for you to consider investing in gold.
Gold has a history of maintaining its value. Paper currency and coins that are not minted from rare metals and in change value. Gold is connected to wealth. It is what people have used for generations to pass wealth from parents to children.
Gold is secure. The US dollar is considered to be one of the strongest currencies on the planet. However, during the economic downturn that started in the late 90s and ended in 2008, the value of the dollar plummeted. Understandably, investors flocked to gold. As a response, the value of gold tripled.
Gold is a hedge against inflation. This is because when the cost of living gets higher, the value of gold increases. When a fiat currency loses value, gold is typically priced in that currency, so the value of gold related to the currency increases.
Gold is seen as a protection against deflation. Deflation happens when an economy has a ton of debt and business becomes stagnant. During deflation, and worse yet during a depression, the purchasing power of gold skyrockets. The prices of other commodities may dip. This is because people protect themselves by hoarding wealth in the form of gold.
Gold is not affected by geopolitical uncertainty. When there is uncertainty around the globe, people flock to gold. In fact, it has been called the crisis commodity. When people lose confidence in their government, the value of gold skyrockets.
These are just a few of the reasons it is beneficial to consider investing in gold.
How Do You Invest in Gold?
If you want to invest in gold, you have three options. The first option is to physically buy gold. The second option is to purchase shares of an exchange traded fund or mutual fund that mimics the price of gold. The third option is to trade in future options and the commodities market. Someone who has a simplistic approach to investing might buy gold coins. However, a person who has a more strategic approach to investing may use options on gold futures.
What Are Gold IRAs?
The experts at Goldco have created a gold IRA guide that provides in-depth answers to the questions investors have about gold. According to Goldco, “Investors can diversify their portfolio… In gold and other precious materials via a precious metals IRA.”
A gold IRA lets you invest in gold and other precious metals while having the same tax benefits that come from an IRA retirement account. With a gold IRA, you can opt to use pre-tax dollars to invest in gold or, similar to a Roth IRA, you can use post-tax dollars. Even those who have a simple IRA can invest via a gold IRA.
Some investors have taken their existing retirement assets and rolled them into a gold IRA. This way, an investor can hold onto the gains they made in stocks and then take that wealth and transfer it to precious materials, which can be more stable during times of economic and social upheaval.
A gold IRA provides diversification in investment portfolios. This diversification is beneficial in the short term and adds value in the long term. Gold IRAs help investors mitigate risk. The further a person gets into retirement, the less risky they want to be with their investment portfolio.
Gold has proven itself to be a stable commodity through millenniums. Investors who had gold in their portfolio when the 2008 financial crisis hit benefited by having investments that outperformed people who kept their assets in stocks. It is expected that this trend will continue.