3 reasons gold bars and coins are a good investment this August

Whether you're a beginner or seasoned investor, it can be difficult to determine the right asset mix for your investment portfolio. After all, your unique goals and budget play a large role in that equation, and there are numerous economic factors to consider as well. And when you add in how many traditional and alternative assets there are to choose from, things can get even more complicated. 

But while the right asset mix can vary for each investor, there is one rule that remains consistent: Diversification is key to a well-rounded portfolio. If you aren't ensuring that your portfolio is diversified across a wide range of assets, you're putting your investments — and your wealth — at risk. 

That's one reason why so many investors are adding gold bars and coins to their portfolios right now. This precious metal is heralded for its portfolio diversification properties (and the other unique investing benefits it offers, too), helping to offset the risk from more volatile assets. That's hardly the only reason to add physical gold to your portfolio this August, though. 

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3 reasons gold bars and coins are a good investment this August

Buying physical gold could make sense this month for the following reasons: 

Gold prices have been rising

Gold prices have been on an upward trajectory since early 2024 and have broken numerous records in the last few months. And market analysts suggest its upward trajectory may continue due to several factors. 

One is that there's been an increase in gold acquisitions by central banks worldwide recently. And gold's inherent scarcity means that rising demand could potentially push prices even higher given the constrained supply. Gold's industrial applications are also growing, with increasing use in sectors such as electronics and medicine. 

For example, in the technology sector, gold is used in the production of semiconductors, connectors and other electronic components due to its excellent conductivity and resistance to corrosion. In healthcare, gold nanoparticles are being used in various diagnostic tests and cancer treatments. And as more innovative uses for gold emerge, it could lead to heightened industrial demand, potentially driving prices upward. 

So while current gold prices may seem high today, there is likely still room for more appreciation throughout 2024 and in the coming years. And while gold's past performance doesn't guarantee its future performance, entering the market now could mean you're positioned to benefit from price increases that occur in the future.

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Market conditions can shift quickly

Gold can play a crucial role in stabilizing your investment portfolio across various market cycles due to its unique characteristics and behavior. For example, when traditional assets like stocks are performing well, gold may underperform or remain stable. While this might seem disadvantageous, it actually helps prevent your portfolio from becoming overly concentrated in high-performing but potentially risky assets.

And as stocks and other risk assets decline, gold often maintains its value or even appreciates. This counter-cyclical behavior helps offset losses in other parts of your portfolio, reducing overall volatility. And while the stock market has been performing well overall, with stocks hitting record highs in 2024, the conditions can change quickly.

For example, on August 2, a new report showed a decline in hiring for July, which caused the Dow Jones Industrial Average to drop by 984 points, or about 2.4% overall. The broader S&P 500 and the Nasdaq Composite were also down by 2.5% and 3.0%, respectively. 

There's no guarantee that the downward trend will continue, of course. What it does illustrate, though, is how quickly market conditions can change — and why it's important to diversify your portfolio with gold or another safe-haven asset.

Inflation remains above the target rate

Gold can also act as an inflationary hedge, which remains important in today's economic landscape. While inflation has been cooling over the last few months, today's inflation rate is still above the Federal Reserve's 2% target, which means prices are still rising faster than they should be. 

That's where gold comes in handy. Unlike traditional paper currencies, which can be printed in large quantities, gold has a finite supply. This scarcity helps it retain value when the money supply increases. So as the cost of goods and services grows due to inflation, gold tends to maintain its relative value. 

By holding gold in your portfolio, then, you can potentially protect a portion of your wealth from the eroding effects of inflation. This helps you maintain your purchasing power now, while inflation remains above the optimal levels, and over the long term.

The bottom line

Gold bars and coins can offer unique benefits to investors this August, from potential price appreciation to portfolio stabilization and inflation protection. And while every investor's needs are different, the enduring value of gold as a diversification tool makes it worth considering. As with any investment decision, though, it's important to carefully evaluate your financial goals and risk tolerance before adding gold to your portfolio.