Saving for retirement can be overwhelming and complicated. It’s not always enough to just put money in a savings account or stock market investments. You’ve heard enough stories of devastating market plunges that have decimated people’s retirement portfolios, forcing them to keep working far past the age they should be.
It can seem like these options are the best we have, even with their risks. However, there’s a much better alternative: precious metal investments. In this article, we're going to cover all of the benefits of gold investing, whether you're a beginner or not.
Many of our readers asked us to review companies they can consider investing with, so before we get into the benefits, here's a summary of the firms with great reputations and thousands of positive 5 star reviews. When you're ready to check them out, you can download a free gold investment guide by clicking the button beneath the company rating.
Now let's dive into the details and benefits of investing in gold.
- Why Invest in Gold?
- Why is Investing in Gold Beneficial vs. Other Metals
- The 5 Best Ways in Invest in Gold
- Where to Buy Gold?
- Preparing for Instability and Economic Hardships
- Final Thoughts
You need to keep track of your retirement portfolio even if you’ve been out of the workforce for years. It doesn’t require being a financial wizard or having an economics degree.
One of the biggest recent developments has been the rise of stock prices and the decline of interest rates. That’s no fluke, but it’s also not something that’s necessarily going to stick around forever.
In fact, we could see stock prices plunge, and interest rates shoot up. When or why this would happen is impossible to predict, it needs to be acknowledged.
It can feel like you’re powerless against these kinds of developments, but the truth is you have way more control than you realize. You just need to learn not to rely solely on stocks.
Gold investments can add unforeseen strength to your portfolio and make your retirement so much more stable.
There’s a history of this precious metal seeing rises in value during times of dollar depreciation and other economic hardships.
Many people think that bonds rise and fall at a rate counter to stocks. However, data indicates that each type of investment sees concurrent movement.
Therefore, if you invest in stocks and their prices go down, bonds, unfortunately, aren’t going to bail you out.
You need to learn about other investment forms if you truly want to feel confident in your portfolio. It can be like the difference between a deadbolt lock and a full-on home security system.
Gold isn't just for institutional investors or the ultra-wealthy. In fact, many people who simply want to protect their savings and retirement choose this historical store of value as a way to safeguard their portfolio.
Why Invest in Gold?
You're likely reading this is to understand why you should or shouldn't invest in gold. Seeing both sides of the coin is imperative to weighing your risks and rewards with any investment. Here are some of the best reasons to invest in gold.
Lengthy History as a Store of Value and Medium of Exchange
This precious metal has a long history of being a currency and medium of exchange for three millenniums.
It might not be as ubiquitous now, in the age of paper currency. However, it's high value is still undisputed.
Although there are other precious metals, gold tends to be favored more by both large and small investors during economic hardship.
Large Amount of Industrial Applications
Nearly three-quarters of United States gold usage is for electronic devices and jewelry, among other things.
Compare that to paper money, whose only usage is as currency. If gold ceased to exist, numerous industries would be significantly affected due to needing this valuable element.
For the last half-century, gold has done very well as a hedge for inflation protection.
Lots of investors have purchased gold to withstand inflation. The general principle is that, as things become more expensive, gold’s price goes up.
This means gold can keep your portfolio afloat even when inflation is raging. You can also make money back on your investment as the demand increases.
Inflation hits the dollar hard, as you can tell by comparing the price of things today to even ten years ago. This gives gold the likelihood to rise even more.
Whenever you hear a story about the dollar losing value, you should check to see how gold’s doing. It’s almost assuredly going to rise in that time.
In these unprecedented times, with central banks printing trillions of dollars out of thin air and reckless governments throwing money down the drain, it's never been a better time to consider gold.
Gold’s price can go up and down, but it’s not good to obsess over every single movement. Instead, concentrate on what’s happening over a longer period.
It can do better than other popular kinds of investments, like property and equity. The hedging function and great demand make gold a very reliable investment target.
Price appreciation is the most significant factor in gold returns.
Some costs are unique to precious metal investments, including storing the metals and keeping insurance on them.
Be sure you have these factored before you commit to any gold investments.
If the stock market is in a slump, those who only invest in stocks and bonds have reason to worry.
However, gold doesn’t get affected by the stock market’s movement. That means you have protection via diversification.
That's one of the main things we want to hammer home in this article. We’re not advocating throwing your entire stock portfolio away and starting over with gold only.
Stocks and bonds can absolutely have their place in your portfolio. It’s just that relying solely on them can lead to trouble.
Diversifying your portfolio is best, so you do not put all of your eggs in one basket.
If your stocks aren’t doing so well, your gold investment can supplement them nicely to keep your overall portfolio value steady.
We also need to mention not to diversify with gold investments specifically. In case gold sees a price decline, you would likely find these gold investments would go down as well.
Gold is not immune to declines in value, although it’s certainly done a lot better than the dollar, especially as of late. Keep a close watch on its performance, just as you would for the dollar.
Overall, you should make sure your portfolio as well-rounded as possible. Speak with your IRA custodian if you’re looking to add new assets to your retirement portfolio.
Countercyclical Investment Value
Perhaps the best argument for investing in gold is its countercyclical investment value.
That might sound like a complicated term, but it’s basically meant to illustrate how gold’s value goes up in times when stocks’ value goes down.
It’s not a mirror. If stocks decline 10 percent, that doesn’t mean the price of gold is necessarily going to increase 10 percent.
However, gold does seem to do the best when the economy is undergoing turbulent times like it is right now.
If you need a historical example, look at what happened in the 1970s. The average price of an ounce of gold went from $36 in 1970 to $615 in 1980. Meanwhile, the S&P 500 went up a mere 22 percent.
What was gold’s increase? How does a slight 1,700 percent sound to you?
The 1970s were seriously fraught with economic troubles, ones that touched different corners of the globe. Yet, there was gold, not only avoiding a crash but actually thriving at an almost flabbergasting level.
It doesn’t end there, either.
During the financial crisis of 2007, the S&P 500 lost more than half of its value. However, gold’s value went from $640 per ounce in 2007 to $1,120 in 2009.
Anyone who thought to invest in gold in that time certainly saved themselves a few gray hairs.
This might sound a little redundant at this point, but gold isn’t a magic pill against all economic worries.
However, when times are tough, and the dollar is down, gold is great to have in your portfolio.
As the federal debt keeps digging into the trillions and stock market trading increasing further, not investing in gold seems somewhat risky.
Why is Investing in Gold Beneficial vs. Other Metals
Although it’s easy to lump gold and other precious metals together, however, more distinctions are being made between metals, and not just on a composition basis.
For hundreds of years, gold was worth 20 times as much per ounce as other metals.
That gap has changed, but it definitely hasn’t narrowed. Right now, gold is worth up to 90 times as much as the other top metals.
An Olympics analogy is appropriate since various metals are used as medals. A second-place winner in swimming is still a great athlete. It’s just that they’re no Michael Phelps.
Also, many more central banks are keeping gold in their reserves. (Russia and China have been loading up for years)
The gap in value between gold and other metals is already incredibly high, and it could very well get higher.
The 5 Best Ways in Invest in Gold
1. Putting Gold into an IRA
A lot of investors don’t realize an established IRA can include precious metals.
You can do this by rolling your IRA into a self-directed one.
With this change, you can handle your investments yourself and vary the types of assets you invest in. You no longer need to stick all your portfolio into stocks.
Lots of retired individuals prefer self-directed IRAs due to their diversification options.
2. Gold Funds and Stocks
Gold stock investing doesn’t refer to businesses with vast quantities of gold.
It actually means ones that are involved in gold mining.
This distinguishes it from physical bullion investments. Here, your investments are going to the companies mining the gold, not the physical gold itself.
However, the price of gold is still vital. If gold sees a rise, so will a gold company. If it sees a decline, well, you should see what we’re getting at.
Investing in gold stocks can pay off. If gold sees a sudden spike in value, the stock price can rise even faster than the gold itself.
The increase in value can also lead to increases in gold company profits.
It’s enough to make you wonder how you can invest in gold mining companies yourself.
Please Note: It’s not all gravy when investing in gold mining stocks, however. Their value can take a severe hit when gold’s value goes down.
If gold isn’t as profitable as it once was, it’s unfortunately only logical that gold companies would suffer as well.
Stock in these companies is also much more vulnerable to economic woes.
If interest rates, government oversight, rise in borrowing costs, and political upheaval occurs, mining companies can easily get caught up in the chaos.
Their association with gold means they can do great when gold is doing great. However, their association with stocks implies that things are much dicier if gold and the dollar take a hit.
Another issue is that gold stocks can stagnate or slump even if gold’s value is going up. Being linked to gold doesn’t give it total immunity to economic hurdles.
3. Gold ETFs (Exchange Traded Funds)
Gold ETF investments are like a midpoint between owning bullion and investing in mining companies. The ETFs are what owns the gold, but you don’t have to feel like you’re just playing the stock market in a different way than before.
These can be purchased via investment brokers or sponsoring fund families.
A gold ETF doesn’t let you own the gold outright, but you will have shares in a fund with ownership.
It’s similar to having stocks or bonds; only it’s gold, not paper money, that’s being invested in.
That simplifies the buying, positioning, and selling processes.
There’s also no reason to worry about the physical costs of owning gold. Many investors get overwhelmed by the toll physical gold ownership takes. It can be a pain even up to the point of selling it.
With an ETF, you don’t have to deal with that frustration.
If you feel better about owning physical gold bullion, go for it. You just need to know about the additional responsibilities that entail.
4. Physical Gold Bullion
You can have thousands of dollars in your bank account without a single dollar in your wallet. However, having physical gold is preferred by many investors.
There’s definitely something intoxicating about having actual gold bars in your home. It makes your investment feel a lot more real.
It can also differentiate itself from other portfolio assets in that you can physically hold it, which isn’t the case with stock and bonds.
Bullion is physically available in coins and bars.
Bar sizes range between one and 400 ounces.
These are ideal if your portfolio is between six and seven figures. Bars also take up much less space than an equal number of coins.
Additionally, their markup is less for bars.
Don’t have as ample of a portfolio or just like coins better? There are numerous ones worth looking at.
The biggest are the Maple Leaf (Canada), the Krugerrand (South Africa), and Eagle (United States).
They have different appearances but are all one ounce.
There are also reduced denominations available, as low as one-tenth of an ounce.
The markup for bullion coins is usually between five and 10 percent.
Where to Buy Gold?
You can’t just pick up gold bars or coins from the supermarket. It’s also not guaranteed to be at your local bank.
You need to visit a shop that deals in gold or, do what most investors do and find a reputable online dealer.
A nice thing about going to a shop is that you can have the gold right away.
However, they might not have as many kinds of bullion as you want. The markup can also be pretty significant. And it's more difficult to confirm if the gold is real at a small shop.
These merchants also tend to make more through selling numismatic coins. If salespeople easily lead you, you could end up leaving with some coins that you just don’t need.
We suggest you lookup any gold dealer on websites like Trust Pilot or Better Business Bureau before you buy anything from them.
Going online for your gold bullion is a smart practice.
You can ask the online retailer to keep the bullion for you. Be sure you can pay for the extra cost of doing so, however.
Among the biggest names in gold are Goldco, Noble Gold, and Advantage Gold.
Preparing for Instability and Economic Hardships
Economic instability is like a hurricane. If you’re not prepared for it happening, your life can be turned upside-down. It can also come in many forms. These are some of the main ways:
- Divides over the Presidency
- Disputes between the United States and Iran, North Korea, Russia, and China
- Increases in deficit spending and debt
- Rises in defaults on car loans
- Student loan debt worsening
- Rising healthcare expenses
- Quantitative easing (central bank money printing)
Do you expect any of these problems to clear up anytime soon? Neither do we. That’s why investing in precious metals is one of the best defense strategies we possibly have.
Who's Our #1 Recommendation?
There are hundreds of gold dealers out there, and many of them we wouldn't go near. There was one company that stood out from the rest, Goldco.
We were shocked to see that not only do they have thousands of 5 star reviews on BBB and TrustPilot, but lots of them are very recent and in depth. You can see exactly what real customers are saying.
They also provide great education, and no pushy sales tactics, which we all hate.
Below is a video from Goldco you can watch to familiarize yourself with how they help those focused on retirement.
Decreased interest rates sound nice, but they’re actually pretty harmful for retired or retiring people. They can make retirees choose between regularly withdrawing their principal for their day-to-day expenses or increasing their stock investments severely.
The former means their money could dry up prematurely. The latter could mean they’d lose significant sums due to a market crash.
The benefits of gold investment are great enough that you should consider making room in your portfolio for it. It doesn’t have to be the totality of your portfolio, nor should it be. It’s simply a nice thing to have as a percentage.
Retirement might be around the corner or sooner than you think. Act now so that you’re able to spend your post-working years relaxing, not worrying about the global economy and the dollar's performance as a means for your quality of life.