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Is Investing in Gold High Risk?

By John Otis

July 1, 2021

As Featured In:

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The vast majority of those who invest in gold are concerned with investing in something tangible. After all, it's worked for most of human history, and it feels like a safe investment in an era when so many other investments feel like nothing but numbers on a screen.


Gold itself has stood the test of time, so it simply makes sense that many would want to hold onto it. In fact, many think of gold as the ultimate risk-averse investment.

Many ignore, though, that being a low-risk investment doesn't mean that there are no risks involved in investing in gold. If you're going to invest in any precious metal, it's vital to understand exactly what risks you will take by doing so.


Gold, like any other investment, can be impacted by a variety of factors. While most gold investors understand that economic problems can drive up the price of gold, that's not the only factor that can impact gold's value.

Gold, like any other item, is greatly impacted by the laws of supply and demand. Gold tends to be more valuable during times of the year when gold gifts are given, for example, but it could lose value if a major new gold mine was to open.

Gold is also quite impacted by a number of other unique issues. Investors don't just pay the price of gold per ounce when collecting coins; for example - they pay special fees and often retail prices in order to get those coins.

It also takes time and money to verify the authenticity of some gold items, an issue that isn't present in an investment like a stock. Those who invest in gold also have to deal with storing gold, a process that can not only be harder to do than you might realize but also one that can often carry a hefty yearly cost.

Risks, of course, are not unique to investing in gold. Every type of investment has its own unique risks, and it's important to stop and think about the risks that you are willing to take at this stage of your life.

If you are relatively young and have many years of work ahead of you, for example, the lower risk profile of gold may not be as important as the fact that it has a lesser chance to yield major rewards.

Gold is an amazing investment for those who are looking to retire in the near future, though, as it protects the money that they have already put away and allows them a limited period of safe growth. Where you stand today will certainly impact whether gold will be the best impact for your future.

With that said, it's also important to look at how gold deals with some of the more common investment pitfalls. There are some very significant problems that most investors encounter, and understanding how gold can mitigate those risks will have an impact on your investing future.

4 Investing Risks That Gold Addresses


#1: Market Risk

One of the biggest risks of any investment is that the value of the investment will diminish over time. While gold prices can and do move, the gold market isn't particularly volatile. This means that any movements are likely to even out over time, helping you to hold onto the value of your investments.

#2: Counter-Party Risk

Many major investments, including bonds, rely on the health of global markets in order to maintain their value. These counter-party risks can render your current investments worthless, leaving you holding onto nothing more than paper. Gold, on the other hand, doesn't have counter-party risks. No matter what else happens, you'll still be left holding onto physical gold.

#3: Inflation

You should always factor inflation into the value of your investments. While it might be nice to know that you will see a certain amount of value growth in your investment over time, the rate of inflation ensures that the growth will be less than you might imagine. Gold tends to beat the rate of inflation, though, which makes it not only a very stable investment but one that tends to be able to ignore one of the prime forces of the market.

#4: Devaluation of Currency

Even the strongest currencies can lose value. When major international shifts occur, even currencies like the Euro or the Dollar can take a major hit. When you invest in gold, though, you're investing in something that tends to not only keep value even when currency is devalued but something that tends to rise in opposition to those trends.

Tips for Buying


Once you understand the risks of buying gold, you can start to think of ways to protect yourself. The following tips might give you the edge you need to invest a bit more safely.

Avoid collectible gold coins

It's fine to buy rare coins, but only if you're doing so because you love them. Tiny differences can mean big money in rare coins, so making them the heart of your portfolio can be a dangerous gamble.

Plan for taxes

Precious metals aren't taxed like securities. Instead, they're taxed like collectibles, which means the sale of gold items is taxed at twenty-eight percent. Make sure that you're aware of the tax rate before you get ready to sell. 

Look at gold funds

Gold ETFs (exchange-traded funds) are traded on the stock market. These funds, which invest in gold bullion, allow their investors to get quicker access to their investments while still leveraging the buying power of the fund. It's vital that you understand what you're getting into here, though, so make sure that you read any fund's prospectus carefully. 

Consider bullion coins (assuming you can safely store them)

One of the better choices for investing in gold is to look into bullion coins. These coins, which come from the US mint, are available in a variety of denominations from authorized dealers. They're relatively inexpensive, as far as gold goes, retailing at around the same price as gold plus some kind of dealer fee. 

These coins are only a good investment, though, if you have a way to store them safely. This means that you'll need to pay for a good safety deposit box as well as insurance since you won't get any kind of FDIC insurance on the box itself. If the price feels right for you, though, this can be a great investment. 

Beware of scams

One of the sad truths of the gold market is that there are many would-be dealers who only want to make money at the expense of the customer. These individuals run many different types of scams, and almost all of them are there to find a way to take advantage of those desperate to make a good investment. 

Never make an investment without doing your research. Look at customer reviews, check for accreditations, and find out more about the company's history. The more than you can learn about the entity from which you are buying, the better off you will be. 

The Best Way to Counter-Act Inflation


It makes sense to look into precious metal investments as a way to prepare for your eventual retirement. Gold feels stable, after all, and those who are looking towards the future often crave stability.

Given the potential for massive inflation in the future and the ever-growing money supply today, it makes sense that many people who are looking to retire would want a way to safeguard their earnings against future devaluation.

Gold is an amazing alternative to traditional investments, and you can use it as a great base for your retirement. You can even take your existing retirement fund and roll it over into a gold IRA, giving you all the advantages of an IRA while still holding onto the metal that gives you peace of mind.

A gold IRA is an advantageous product. It tends to rise in value against the economy, giving you a safety net when the market falls. It also has the history of gold to back it up, giving you a bit of a shield against any changes that the future brings. In short, it's the type of investment instrument that gives you the ability to feel confident that you will be able to take care of yourself once your working days come to an end.

You don't need to put every dollar in a gold IRA, of course. If you've still got many years left until retirement, you can put only a portion of your investment funds into precious metals so that you're prepared for the future.

Once you close in on retirement, you can protect everything that you have earned by rolling it over into a Gold IRA. Investing at the exact right time is hard, but you don't need to get the exact timing to take advantage of the market. Gold makes sense right now, and any risks involved are outweighed by the possible rewards.

How To Begin?


There are many gold companies out there who help people like you open an IRA account and select the right metals. 

Only a handful of these companies have a great reputation with hundreds of 5 star reviews from customers. 

The top rated company, Goldco, has over 1,000 five star reviews by themselves, which is completely unheard. 

Each one of these 3 companies below can help you get started. Even if you just want to educate yourself first, you can request a gold IRA guide by clicking the "visit site" button.

Please note:  Goldco is currently offering $10,000 in free silver to your qualified IRA account when you open it. 

We don't know how long this offer will be available so it's worth it to check out the details. To learn more about the 10K free silver offer from Goldco, click right here

#1
  • Thousands of 5 star reviews
  • Top overall choice
  • Excellent customer experience
  • A+ BBB rating
  • Free gold investing kit
#2
  • 4.96 overall rating on BBB
  • Excellent customer reviews
  • No cost portfolio review
  • Great leadership team
#3
  • In business since 2003
  • Solid reviews
  • Great educators

John Otis

About the author - John Otis

In the modern age of reckless government spending and central bank money printing, my sole objective is to help others protect their savings, retirement, livelihoods, and purchasing power from currency devaluation. Otis Gold has been featured in Financial Times, Yahoo Finance, Kitco News, Motley Fool, Seeking Alpha, and more. If you have any questions or comments, leave them below. Welcome!


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