Gold prices are at a record high. Here's what to know before investing.
The price of gold surged to a record high in March and has shown no signs of cooling so far in April. It hit a new high of $2,259.29 per ounce on April 1 and has moved up since (with today's gold price at about $2,292.30), giving current gold investors reason to rejoice.
That said, gold doesn't operate like other traditional assets, and the benefits of investing in the precious metal differ from other investment options. With this understanding and the rising price of gold a top consideration, prospective investors should familiarize themselves with what gold can (and can't) do for their overall portfolio right now.
Are you considering a gold investment now? Start by reviewing your options here today.
What to know before investing in gold now
To get the most out of a potential gold investment at today's high price, it helps to know the following three factors.
It's not a traditional income-producer
While investors can, in theory, make money by investing in gold, particularly now as the price continues to head upward, it's wont typically occur as quickly or as consistently as it can with other assets. Instead, it's typically more beneficial as a way to hedge against inflation (thanks to its steady value) and a way to diversify your portfolio (when other assets underperform).
Learn more about the benefits of gold here now.
There are many types to consider
While the price of gold is commonly associated with the metal in physical form (like bars and coins) there are multiple types of gold investments to consider. Gold IRAs, gold ETFs, gold stocks and gold futures all have unique advantages for investors right now. But the benefits of each will depend on your investor profile (futures, for example, are generally not advisable for beginners). The rising price will affect each of these investments in different ways, however, so make sure to thoroughly research each type to understand which is best for you.
Your investment should be limited
As an asset rises in price it can be tempting to overinvest to get ahead of any dramatic price increases to come. But gold won't necessarily be as beneficial for investors the same ways stocks and bonds will, for example. So it's important to keep any gold investment limited, even in the face of rising prices. Most experts advise capping a gold investment to 10% or less of your overall portfolio, although the exact amount will vary depending on your goals and investment horizon (seniors, for example, may want to invest in less gold than younger investors).
The bottom line
With the price of gold continually breaking records new investors will inevitably take notice. But it's important to know what the precious metal can (and can't do) before getting started. It's not considered a traditional income producer, even with the rising price. And there are many types to consider, not just what can be purchased in physical forms. Finally, any gold investment, no matter the form, should be limited to just a sliver of your overall portfolio. By keeping these factors in mind, investors can improve their chances of gold success both now and as the price of the precious metal adjusts in the future.
