Here's why gold is still a good investment
Gold has been in high demand this year. In the face of economic woes from interest rate hikes to bank failures, more investors have turned to gold to safeguard their money and protect themselves from market turbulence. After reaching a near-all-time high of $2,048 in mid-April, gold prices continue to hover around the $2,000 mark, and experts predict they could go even higher.
This trend seems likely to continue. A recent Gallup poll found that nearly twice as many Americans consider gold the best long-term investment this year compared to last year. Are they right? Is now still a good time to invest in gold? Read on to learn more.
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Here's why gold is still a good investment
Gold remains a smart investment for many reasons. Here are three of them.
It protects you from inflation
Inflation can significantly affect the value of your investments. Gold acts as a hedge against inflation because it tends to perform well when other assets lose value.
Gold prices generally rise when inflation is high as people turn to the precious metal to protect their wealth. And while a recent Federal Reserve report shows the inflation rate has begun to slow down, many experts believe we'll be in an inflationary environment for some time yet.
"Inflation is probably not going away anytime soon," says Stuart Boxenbaum, CFP and president of Statewide Financial Group. "Unless and until that does change, having an inflation hedge such as gold… as part of your overall portfolio is likely a very good idea, especially if you don't own one currently. Because the U.S. dollar is also very weak and probably will get weaker, it makes that much more sense to own this kind of inflation hedge now as a long-term investment."
It offsets losses in your portfolio
One of the best ways to ensure your portfolio performs well is by diversifying your investments. By including a mix of assets with varying levels of risk and reward, you can maximize your returns while minimizing your losses. Gold is a great way to counterbalance riskier assets like stocks, which can be especially helpful in times like recession (which we may be entering later this year).
"Gold typically behaves in inverse correlation to the stock market," William Bevins, CFP, CTFA, recently told CBS News. When the stock market underperforms or drops, gold tends to (but not always) rise or stay steady. So, in a volatile market, gold can help keep your investments protected.
It delivers reliable long-term returns
Whenever you choose to invest in gold, it can serve you well in the long run. It's been a trusted form of currency for centuries, it's proven good at riding out economic storms and it tends to gain value when other assets lose it. And because it's a tangible, finite commodity with a range of uses, it's a sustainable asset that investors can hold onto for years without worrying about its value suddenly plummeting.
While you can study current gold prices to help you decide when is the best time to buy, the short answer is that gold is worth considering in any economy. Because it's a good long-term investment, experts recommend keeping a percentage of your portfolio in gold at all times to reap its benefits fully.
"For someone that likes [the concept of gold investing] but is not sure how much or where to start, using a 10% amount of your overall portfolio is a simple rule of thumb," Boxenbaum says. "So, if your portfolio totals $250,000, $25,000 is an appropriate amount to start with."
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The bottom line
Gold has been a popular investment lately, but that's only one reason it's worth considering. Whatever the broader economy is doing, having gold in your portfolio can protect your money from inflation, help you weather economic turmoil that damages the value of other assets and provide steady returns over the long term. And with many different ways to invest in gold, it's easy to add a touch of gold to your portfolio today.
