How to invest in gold as inflation drops, according to experts

As inflation soared to 9.1% in June 2022, many people turned to gold to protect their wealth. But inflation has since cooled to 2.5% in August 2024, and the Federal Reserve, which just cut rates by 50 basis points, is hinting at more interest rate cuts.

This change has left many wondering: Is gold still a smart investment?

While gold's role as an inflation hedge might be less crucial now, experts say it still has a place in a well-rounded portfolio. "There is tremendous demand for gold … so it's an opportune moment to invest in [it] and diversify," says Alex Ebkarian, COO and co-founder of Allegiance Gold, a precious metals dealer.

But how should you approach gold investing in today's market?

Below, we'll share expert strategies and explore a few options to help you make the most of gold investing as inflation cools.

Learn more about your gold investing options today.

How to invest in gold as inflation drops, according to experts

Fundamentally, investing in gold as inflation is falling isn't too different from other times — but it requires a thoughtful approach. In turn, financial advisors and investment consultants suggest the following strategies:

• Dollar-cost averaging: Instead of trying to time the market, invest a fixed amount regularly. This approach helps smooth out price fluctuations over time.
• Diversifying: Mix different types of gold investments or even silver/silver IRAs to spread risk.
• Thinking long-term: Think of gold as a long-term investment rather than a short-term profit opportunity.
• Staying informed: Keep an eye on factors influencing gold prices, such as interest rates, currency fluctuations and global economic conditions.

With this in mind, let's go over three common ways to invest in gold, each with its benefits and risks:

Gold mining stocks

When you buy gold mining stocks, you're investing in companies that mine gold.

"This requires research about individual companies and knowledge about counterparty risk," warns Ebkarian. In simpler terms, you must study the companies carefully before investing.

While these stocks can offer higher returns, Steven Conners, founder and president of Conners Wealth Management, cautions that they're high-risk. Their values can fluctuate quickly based on factors such as company management and mining costs — not just the price of gold.

It may be better to stick with physical gold if you have a small appetite for risk.

Ready to invest in gold? Find out how to get started here.

Gold ETFs

Gold exchange-traded funds (ETFs) allow you to invest in gold without owning physical metal. Conners suggests using them to complement your other investments, rather than as a major part of your portfolio.

Paul Wong, market strategist at Sprott Asset Management points out some benefits of gold ETFs: They're easy to buy and sell, have lower costs than physical gold and don't require storage.

However, they come with some drawbacks, such as management fees and the fact that you don't own physical gold.

Physical gold

Buying physical gold means owning actual gold bars or gold coins.

Ebkarian observes that more investors are favoring gold ownership over gold exposure. "Physical gold allows [you] to hold an asset and be in control," he says.

Wong outlines several pros and cons of investing in physical gold as inflation drops.

Pros:

• Tangible asset you can hold
• No counterparty risk
• Globally recognized store of value
• No ongoing management fees (aside from storage)

Cons:

• Requires secure storage and insurance against theft or loss
• Less liquid than other gold investments
• Higher transaction costs when buying or selling
• No income generation

Beyond inflation: Other benefits of gold investing

Gold offers more than just protection against inflation.

Here are a few other reasons to invest in gold, according to the experts we spoke to:

• Safe-haven asset: Gold can preserve your wealth when other assets might be struggling during uncertain economic times.
• Portfolio diversification: Adding gold can balance your investment mix. The World Gold Council suggests allocating up to 10% of your portfolio to gold.
• Liquidity: You can usually sell gold quickly and easily when you need cash.
• Long-term growth: Gold has solid returns over time. From 1971 to 2024, it averaged a 7.98% annual return, making it a viable option for retirement planning.

The bottom line

Gold can still be a valuable part of your investment strategy as inflation cools, but you must understand the risks and potential rewards. "There's always volatility in the gold market, so investing in gold isn't without risk," Ebkarian says.

Ask yourself: Are you comfortable with the possibility of a 5% to 10% drop shortly after investing?

If so, Conners recommends making a move now. This way, "if it continues its ascent, you'll be on the right track. And if it declines, you could always purchase more," he says.

But before jumping in, discuss your options with trusted financial advisors to see how gold fits into your overall financial plan. Your approach should align with your goals and risk tolerance.