- Gold is a precious metal that has historically been used as a safe haven in times of economic turmoil.
- There are several factors that can influence the price of gold, including interest rates, currency, inflation, and the stock market.
- Gold is a commodity whose price is affected by supply and demand.
- Gold is mined from the earth in small amounts, so the price is often affected by geopolitical events, such as wars or political unrest.
- Gold is traded around the world, so its price is affected by currency fluctuations.
Gold, a rare precious metal, has been a coveted commodity for centuries. Gold can be melted down, shaped, and molded into virtually anything. The metal, which has been used since the dawn of civilization, is historically used in everything from jewelry to electronics.
Historically, gold has been considered a safe investment, particularly during times of economic uncertainty. The metal, which is depended upon by industry, governments, and central banks around the world, is valued worldwide.
We’ve dedicated hundreds of hours to researching the top precious metals investment companies, perfect for anyone looking to invest.
Gold IRA Rollovers
Gold is one of the most popular, and safest, investments for an IRA, and because gold IRAs do not require a custodian, gold can be held in your own name. There are varying types of gold IRAs, and the most common are:
Self-directed Gold IRA
Custodians Self-Directed Gold IRA
Traditional Gold IRA
A self-directed gold IRA is an account in which you and your custodian hold the gold directly. This account allows you to choose from a variety of gold IRA products.
Gold vs. Other Investments
When you contrast gold’s performance and volatility with other assets, it’s clear that gold has the advantages of being:
More reliable: As a hedge against inflation, gold offers more stability than stocks and bonds, which fluctuate with the market.
Less volatile: Gold prices tend to hold up better during market downturns, which can occur suddenly and quickly. When the market collapses, gold typically doesn’t.
More secure: Gold is not dependent on the health of the economy, unlike stocks, which rise and fall with the market.
More divisible: Gold is divisible in a way that silver and platinum aren’t.
Gold vs. Other Retirement Accounts
Many investors, especially younger investors, own their gold in their retirement accounts.
Some investors choose to keep their gold in their retirement accounts because it is easier to keep track of, and because gold doesn’t trigger tax consequences.
However, others choose to hold their gold outside of their retirement accounts, as it allows them to have more flexibility.
Gold vs. Other Assets
Gold has been an accepted form of currency for thousands of years. The precious metal has value because it can be melted down or refined into various forms, and because these forms are in high demand.
No other asset has that kind of demand, which makes it safe and stable. However, since gold is not backed by a government or central bank, it is not considered legal tender. That makes it hard to use Gold as a medium of exchange.
Gold vs. Bonds
Gold and bonds are two of the oldest investment vehicles, with gold being one of the first forms of money. Gold has been a safe-haven asset for centuries, which makes it attractive to the sophisticated investor. Gold has been seen as a safe haven for wealth preservation.
Gold vs. Stocks
Stocks and stock indices have a long history of outperforming gold. Between 1972 and 2014, the S&P 500 outperformed gold by an average of 4.1% per year. However, during the financial crisis, gold outperformed the S&P 500 by an average of 18.9% per year.
Gold vs. Real Estate
There are two main ways to begin investing in physical gold. Purchasing coins or bullion bars is the most practical solution, though there are other more esoteric options.
Purchasing coins or bullion bars is the most straightforward way to invest in physical gold. Gold bullion is available in many sizes and shapes, ranging from tiny 1/20 oz. coins to huge 100 oz. bars and is priced based on weight and purity.
Coins are an easy way to begin investing in gold. Many coin dealers offer certified coins that are guaranteed for weight and purity. Other coins, however, are not certified and vary in value based on condition and rarity.
Gold bullion bars can be purchased directly from the U.S. mint or from private gold dealers. Bars generally come in 1 oz., 1/10 oz., 1/4 oz., and 1/2 oz. sizes.
Gold ETFs
Gold exchange-traded funds (ETFs) are traded on major exchanges and can be purchased on margin. The funds invest in physical gold and (unlike coins and bars) are not held in custody by a third-party mint or dealer.
However, because of high commissions, ETFs are not a cost-effective choice for most investors.
Gold Mutual Funds
Gold mutual funds invest in physical gold. They do not have a fixed share price (like ETFs), but have a fixed NAV (net asset value). Mutual funds are typically more tax-efficient than ETFs.
Gold vs. Other Gold
Gold is the most stable investment against inflation, geopolitical uncertainty, and other risks that are unpredictable. Other investments, such as dollars, euros, stocks, and even commodities, can fluctuate wildly. Gold has no intrinsic value, but its value is still believed to be very high.
Gold vs. Stocks
Many investors choose to invest in gold over stocks. Historically, gold has outperformed stocks. It tends to rise and fall less during market crashes. In addition, gold can help diversify your portfolio.
Trust and Safety
Fidelity is the world’s largest gold exchange-traded fund (ETF) issuer and is a trusted brand among investors. A 401k account is a retirement account, and it is crucial that your investments are safe and secure.
Gold is 100 percent physical. Unlike paper currencies, gold cannot be devalued. It maintains its value, even in economically turbulent times.
Gold is Portable
Gold is considered the most portable currency in the world. You can hold it in your hands, put it in your backpack, or hide it under your pillow.
Gold is Easy to Store
Gold is a commodity that doesn’t take up much space. You can store it on a shelf for safekeeping.
Gold is Easy to Trade
Gold is traded 24/7 on electronic exchanges around the world. You can invest and cash in whenever you wish.
Tax Advantages
When investing in precious metals-backed funds, your returns will not be taxed until you withdraw the money from your account. When selling your gold bars, you’ll pay capital gains taxes. Gold mutual funds and ETFs may distribute capital gains to their shareholders at an advantageous rate.
Liquidity
Gold is liquid. Unlike stocks, there are no trading windows or holidays. Gold bars can be bought and sold at any hour, every day of the week.
Price Stability
Gold prices don’t fluctuate like stocks. Gold gained 10% in 2007 but lost 28% in 2008. Meanwhile, the S&P 500 lost 38% of its value during the financial crisis.
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Gold as a Hedge
Gold is a hedge against inflation. Simply put, gold is real money, and real money is immune to inflation. When inflation increases, the dollar buying power of gold increases as well. For example, when the U.S. dollar loses 1% of its value, an ounce of gold gains about 1%.
Gold as a Store of Wealth
Gold is a safe haven asset. In times of economic uncertainty, investors turn to gold for its protection against inflation and devaluation. Gold is inexpensive to buy, and its price is not affected by economic factors.
Gold as a Commodity
Gold is an industrial commodity. Gold is used in the production of many electronic products, including cell phones, computers, and televisions. Gold is also used as jewelry and to make art.