Discover the Benefits of Gold Investing

  • Gold has long been a popular investment choice because of its relative stability.
  • Gold prices tend to move less than other precious metals like platinum or silver.
  • A gold investment also typically does not move as much as the stock market. However, an investor's choice of coins can have an impact on the holding's overall value.
  • Gold prices have generally been moving higher since 2016, although fluctuations do occur. Investors who want to invest in gold can choose from a variety of forms: bullion coins, gold exchange-traded funds, and gold bars.
  • These forms vary in value, accessibility, and liquidity.

Gold has long been considered a safe haven for people unsure of the well-being and stability of their investments. Countries and individuals alike typically hold gold as a hedge against inflation or economic turmoil.
Gold's value is tied primarily to inflation, which affects interest rates, and equity prices, which drive the investing public's confidence.



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Gold Investing Pros and Cons

While gold investing has certain drawbacks, it also offers some unique, compelling benefits. Here are six reasons to invest in gold.
Protect Your Portfolio's Value
Gold prices have always tended to rise when stock prices fall. Gold bullion and gold investments can act as a hedge against volatility in the stock market, if the stock market were to suddenly plunge.
Diversify Your Portfolio
Gold investments can help diversify your portfolio, and thus reduce your overall risk. By buying gold, you can reduce exposure to stocks and bonds, which can move in opposite directions.
Hedge Against Inflation
Gold investments can act as a hedge against inflation. Because gold is scarce, increases in demand typically cause its price to rise.

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Increase Your Net Worth
Unlike cash, gold investments typically increase in value over time. Gold bullion and gold shares offer inflation-adjusted returns, making them viable long-term investments.

Protect Your Money
Although gold investments are a way to invest money, they are also a form of protection against inflation. Cash, which is typically stored in banks, can become worthless if inflation rises significantly.

Invest in a Physical Asset
Gold investing offers a tangible investment. If you own physical gold bullion, you can hold the metal in your hand. Gold coins, bars, and other physical gold investments are tangible assets.

How Is Gold Investing Different From Other Types of Investments?

Gold investing is different from other asset classes, such as stocks and bonds, in many ways. Here are some of the most important differences between investing in gold and other assets.
Diversification: Gold investing offers investors diversification because it is uncorrelated to other asset classes. However, it is important to keep in mind that gold also has its share of risks.
Liquidity: Investing in physical gold bullion is very liquid. For example, if you need cash quickly, you can typically sell gold bullion quickly.

*Disclosure: The author holds no position in the aforementioned securities.



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Why Gold Investing?

Gold has long been the favored investment of wealthy individuals and governments. Many central banks keep gold in reserve, as it is widely seen as both highly liquid and a reliable store of value. To investors, gold's value rises and falls with inflation.
Gold also has unique traits that set it apart from stocks, bonds, and other investments in the financial sector. Gold is a tangible asset, which is valued based on supply and demand. Gold holds a certain value, which can be judged by examining the market price per ounce.
Gold is also considered a safe haven asset. When investors fear a financial crisis, they turn to gold, as it is viewed as a stable investment that won't fluctuate in value.
The benefits associated with gold investing include:
Low Correlation to Stocks
Gold is considered a safe-haven asset, typically increasing in value when stock markets decline.
Diversification
Gold holds value over time, and during turbulent times when stocks decline in value, gold's value increases.
Liquidity
Gold is liquid, which means it is easy to buy and sell. This advantage makes gold a good portfolio diversification tool.

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What Is Gold's Price History?

Gold's value has varied significantly over time, ranging from about $20 per ounce in 1933 to over $1,900 per ounce in 1980. The metal's price will be influenced by a variety of factors, including:
geopolitical instability

inflation

changes in currency values

How Can I Invest in Gold?

Being an inextricable part of our daily lives, gold is a metal that most of us are familiar with. However, gold investing is a very different thing. In fact, there are a variety of gold investment options available, and this fact makes gold investing a very attractive proposition to lot of investors. Some of those options are:
Gold ETFs

Gold futures

Gold options

Gold mining stocks

Physical gold

Gold storage

Gold coins

Are There Any Other Ways to Invest in Gold?

Investing in Gold can be done in two ways:
Physical Gold Investing - This involves purchasing and selling gold in the form of coins or bars.

Gold ETFs - An exchange-traded fund (ETF) is a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund. There are a number gold ETFs out there that you can purchase and trade.



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The Bottom Line

While gold may again be in the news for negative reasons, the precious metal still offers a number of benefits to investors, including:
A hedge against inflation;

A hedge against uncertainty;

A hedge against currency devaluation;

A hedge against poor market performance;

A hedge against geopolitical risk;

Diversification;

A safe haven in times of crisis;

A hedge against stocks; and

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A store of wealth.