Are 1-ounce gold bars still a good investment with inflation falling?
When the latest inflation report was released this week, it offered good news for many Americans. After ticking back up unexpectedly in early 2024, inflation cooled again in June, falling to 3.0%, a drop of about 0.1% from the month prior. This is the third consecutive month-over-month drop and the fastest inflation has fallen since June 2023. And, with each drop in inflation, the rate inches closer to the Federal Reserve's 2% target, meaning that the likelihood of future Fed rate cuts also increases.
But even if the Fed keeps rates steady at its next meeting, the drop in inflation will likely have a positive impact on a few areas of the economy, including the cost of essential goods like groceries and housing. It's also a positive development for borrowers, as the Fed has for the last year kept interest rates locked at a two-decade high in an effort to curb inflation. With inflation easing, there could soon be a drop in interest rates, which would provide some much-needed relief for those who need to borrow money.
While declining inflation may be a bright spot in many ways, it could also impact certain types of investments, including gold. Gold investing has had allure for investors over the past year, due in large part to inflationary concerns and economic uncertainties. Now that inflation is on the decline, though, are gold investments — and 1-ounce gold bars in particular — still a good option?
Learn more about how the right gold investment could pay off here.
Are 1-ounce gold bars still a good investment with inflation falling?
The short answer is yes, 1-ounce gold bars could still be a good investment for the right investors, even with inflation falling. That's because while gold tends to shine during periods of high inflation, its appeal as an investment vehicle extends well beyond its role in that capacity.
For starters, gold is an excellent tool for portfolio diversification — and a diversified portfolio is important even with inflation easing. A well-diversified portfolio is built to weather any type of financial issue and gold's value tends to move independently of stocks and bonds, so by adding gold to your portfolio, you gain protection against losses from traditional investments due to market volatility.
And, while short-term price fluctuations can occur, gold has historically maintained its value over long periods, making it a reliable store of wealth. So, by investing in gold now, you're likely to see the value of your gold remain stable and increase over the long term. Gold can also serve as a hedge against currency devaluation, which can remain a concern even as inflation falls.
Plus, global economic challenges are still a real issue in today's economic environment, despite today's improving inflation figures — making gold, and, in turn, 1-ounce gold bars, a smart bet. After all, geopolitical tensions and economic challenges that occur in other parts of the world may help to drive demand for gold as a safe-haven asset, so putting some money into this type of gold bar could pay off, even if inflation continues to improve.
And, there are other reasons to consider investing in this type of gold bar, including:
- Ongoing inflation protection: While inflation has been falling, it's important to remember that economic conditions can change — and you'll need access to an asset that can protect your wealth when they do. And, since gold is an inflation hedge, it can serve as long-term protection against future inflationary pressures that arise.
- Liquidity: Another big benefit to investing in this type of gold is that 1-ounce gold bars are highly liquid and easily traded.
- Reduced counterparty risk: Unlike many financial assets, physical gold doesn't rely on any counterparty's promise or performance, reducing certain types of risk.
Compare the gold investing options available to you online now.
Potential downsides of investing in 1-ounce gold bars
But while 1-ounce gold bars could still be a good investment for the right person, it's important to also consider the potential drawbacks, including:
- Cost of storage and insurance: Physical gold requires secure storage and insurance, which can add to the overall cost of the investment.
- Lack of passive income: Unlike stocks that may pay dividends or bonds that provide interest, gold doesn't generate passive income.
- Price volatility: While gold is often seen as a stable asset, its price can still be volatile in the short term.
The bottom line
While falling inflation may change the investment landscape, 1-ounce gold bars can still be a good investment. Their role as a diversifier, store of value and hedge against various economic risks remains relevant, even during times of lower inflation. As with any investment, though, it's crucial to do thorough research, weigh your options, consider the potential downsides and determine what assets fit best in your strategy. That way, you can ensure that you're building a well-balanced portfolio that can withstand various economic conditions.
