3 of the best reasons to invest in gold
The start of the new year is an excellent time to reassess your investments. It may be a time to review how your investments are performing amid a volatile stock market, world unrest, and inflation, which remained 7.1% higher in November than it was one year ago, according to the Consumer Price Index (CPI).
Many investors are turning to gold, which is seen by many as a safe haven asset for your money during inflationary periods and volatile markets.
If you think you could benefit from investing in gold, start by requesting a free wealth protection kit.
3 of the best reasons to invest in gold
If you're interested in gold as an investment, here are three reasons to act now.
Gold's help with inflation
When inflation rises, the value of your money falls, meaning you need more money to buy the same amount of goods and services. One of the most appealing benefits of gold investing is that the metal isn't tied to any form of currency.
As such, the value of gold typically has an inverse relationship with the value of the dollar. In other words, gold is up when the dollar value is down. Put another way, the price of gold often moves in the same direction as inflation, suggesting that gold investment may help you preserve the value of your savings over time.
Since 1971 the price of gold has increased an average of 15% when inflation has exceeded 3% on a year-over-year basis, according to a World Gold Council study.
When the CPI exceeded 5% annually, gold averaged close to 25% growth. As of November 2022, the CPI is 7.1% higher than its rate from 12 months prior. Of course, past performance does not guarantee future results, and investors should research the market and consult their financial advisers before making investment decisions.
Gold's potential benefit in diversifying a portfolio
Diversification is a critical strategy for your portfolio, and it can spread out risk and reduce your vulnerability to market conditions. While there are several ways to diversify, one of the most common ways is to invest in precious metals like gold to balance out other investments like stocks, bonds and real estate.
Gold is an attractive asset to diversify your portfolio in part because of its history of negative correlation with stocks and other assets. For example, inflation soared from 5.84% in 1970 to 13.58% in 1980, while gold catapulted from $35 per share to $850 per share.
More recently, the S&P 500 has returned a year-to-date rate of -17.88 as of December 16, 2022). At the same time, gold has fared significantly better despite dipping in value, down -3.05% year-to-date.
Because of this negative correlation with equities, investors pursuing a balanced portfolio add some gold to their equities holdings to reduce their exposure to risk.
Learn more about the benefits of investing in gold by requesting a free wealth protection kit from Goldco.
Gold has a limited supply
One of the main reasons gold is valuable is because of supply and demand principles. There's a finite amount of gold, making it a scarce precious metal. Mining precious metals is difficult and costly, requiring exploration to find gold and extraction to remove the gold from the earth.
And even when gold is successfully mined, it doesn't always yield large amounts of gold. World Gold Council data reveals that global mine production supply in 2021 amounted to 3,560 metric tons, over 400 metric tons shy of the total demand (excluding over-the-counter) for the metal. Limited supply combined with steady demand is one of the reasons gold remains a valuable store of value.
The bottom line
If you decide to invest in gold, it's a good practice to stay up-to-date with gold market trends and track gold mining companies' performances. Doing so can help you understand how gold's value may change in the future.
Also, understand gold's place in a diverse portfolio. While periods of growth exist, so do periods of decline. It's probably better to view gold as a part of a long-term gold investment strategy as it tends to hold its value over time. Additionally, gold can act as a hedge against inflation and an asset that may lower your exposure to market risks.
As with any investment, weigh the pros and cons of gold investing before making a financial decision. Learn more with Goldco now.
