4 reasons to buy gold in 2024

It's a safe haven. It protects against inflation. It diversifies your portfolio. It stabilizes your holdings in times of world turmoil.

These are some common reasons often cited by those who invest in gold—and we're seeing many of those conditions today. For instance, the Federal Reserve has made extensive efforts to curb inflation, but rates remain elevated and could continue to drag on the economy in 2024.

And while the S&P 500 has earned around 8.5% so far in 2023, that figure still falls below the average 13.7% return of the past decade. Adding a slice of gold to your portfolio could help diversify it to smooth out potential losses in the coming year. Below, we'll break down some reasons to consider buying gold in 2024.

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4 reasons to buy gold in 2024

Here are five compelling reasons why you may want to buy gold in the upcoming year.

Hedge against inflation

Gold has long been seen as a hedge against inflation. When inflation soared in the 1970s, the decade began with a starting average inflation rate of 5.84% and skyrocketed to 13.58% by 1980. However, gold performed exceedingly well during this period, climbing from $35 per ounce to $850 per ounce, according to Nasdaq data. 

More currently, the rate of inflation in 2023 has hovered between 3.00% and 6.40%, according to the Consumer Price Index. At the same time, MacroTrends reports the price of gold has increased 9.21%. While past performance doesn't guarantee future results, investing in gold could make sense as protection against a weakening dollar.

Learn more how gold can help you with inflation here now.

Tax benefits

In some cases, gold investment offers tax benefits not available with other investments. For example, you can purchase a gold individual retirement account (IRA), which allows you to grow your retirement nest egg tax-free or on a tax-deferred basis. Consider the following three gold IRA options:

Generally, there are three types of gold IRAs:

• Traditional gold IRAs allow you to grow your fund with pre-tax dollars and pay taxes when you begin taking retirement distributions.
• Roth gold IRAs grow tax-free, and you fund your account with after-tax dollars. As such, you don't pay taxes when you make eligible withdrawals in retirement.
• SEP gold IRAs are designed for small business owners and self-employed workers. Like a traditional gold IRA, you fund your account with pre-tax dollars and you can also add money to your employee's gold IRA accounts.

Diversification of portfolio amid possible volatile market

Another reason many investors buy gold is for its diversification potential. Gold is said to have an inverse relationship with the stock market. For example, GoldSilver data reports that gold prices increased during six of the eight largest stock market crashes of the last four decades. During the financial crisis from October 2007 to March 2009, the S&P 500 lost 56.8% of its value, but gold fared well, with prices rising 25.5% over the same period.

If you anticipate turbulence in the stock market in 2024, consider investing in gold to diversify your portfolio and help stabilize any drastic decreases in the financial markets.

To create more liquidity

If you're heavily invested in real estate, retirement accounts and other assets that can't be quickly sold or exchanged for cash, investing in gold may be a good option. Generally, gold is considered a liquid investment, meaning it's relatively easy to buy and sell. Before selling your gold to a jeweler or a reputable gold dealer, many experts recommend getting it professionally appraised by a member of an appraisers association, such as the Appraisers Association of America or the National Association of Jewelry Appraisers.

The bottom line

If you decide to invest in gold, there are several ways you can do it, depending on your financial goals. Physical gold bars and coins give you a tangible asset you can touch and keep in your possession. However, if you're looking for a more liquid option, a gold exchange-traded fund (ETF) can be easily bought and sold through a brokerage account. Lastly, a gold IRA allows you to add gold to your retirement portfolio for the tax advantages of an IRA, along with the stability of gold.