Why gold investing has increased this year
Investment demand for gold has seen a significant increase so far this year. That's good news for the price of gold. After all, gold is bound by the law of supply and demand. So, as demand rises, so too does the price of the precious metal. Gold, whether invested in as an IRA, gold bars or coins or even as stocks or ETF, has always had some benefit for investors.
But why are investors piling into gold now and is the trend likely to continue? That's what we will explore below.
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Why gold demand is on the rise this year
Any time investment demand for an asset rises, there are going to be at least a few reasons for the uptick. Gold is no different. Some of the biggest reasons for the gains in gold's price are outlined below.
Gold calms inflation fears
Inflation has been high throughout the year. There's no question this is lending a hand to increasing gold demand since gold is a classic inflation hedge. This source of demand is likely to continue, too.
The Federal Reserve has been combatting inflation by increasing interest rates relatively consistently throughout the year. And it's possible, if not likely, that they will rise after the Fed meets again on October 31.
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Gold is a safe store of value during geopolitical uncertainty
Geopolitical uncertainty is akin to market uncertainty. When geopolitical times are concerning, investors tend to look toward gold and other safe havens to ride out the storm. The term uncertainty barely describes the condition of the geopolitical stage at the moment.
The conflict between Ukraine and Russia is far from reaching a resolution and a new conflict in the Middle East is making headlines every day. Considering these issues, it's not surprising to see more and more investors looking to the safety of gold.
Stuart Boxenbaum, president and founder of Statewide Financial Group in Jupiter, FL recently told CBS News that considering "the uncertain times we're in now, between the war in the Middle East and an uncertain economy here in the United States and around the world, it makes more sense now more than ever to play safe."
Gold offers diversification value
No matter how large your risk appetite may be, it's always a good idea to hedge your bets in your investment portfolio. That's where diversification comes in.
Gold is a compelling tool for diversification. The commodity typically has a negative correlation with the stock market, meaning that when stocks are down, gold is often up. Unlike many other safe havens, gold can also be a strong store of value - alleviating the inflation-related concerns you'd see with assets like bonds.
As geopolitical and economic uncertainty continue to rise, investors are likely to continue looking for diversification opportunities like gold and similar assets.
Gold can be tax-advantaged
Some gold investments come with tax advantages, too. That all depends on how you invest in the commodity. You can invest in gold as a retirement play with a gold IRA. When you do, you enjoy the same tax advantages on your gold investments as you do with traditional investment accounts. For example:
- Traditional gold IRA: When you choose to go the traditional gold IRA route, you make contributions on a pre-tax basis.
- Roth gold IRA: When you choose to invest in a Roth gold IRA, your money grows on a tax-free basis.
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The bottom line
More people are getting into gold investments and for several good reasons. As geopolitical, economic and market conditions continue to keep investors on the edges of their seats, demand for gold is likely to continue upward with prices following. Add gold to your portfolio to take advantage of any future gains in the price of the precious metal.
