Looking at the current economic uncertainty in the global market, it is clear that, as an investor, I need to come up with a feasible solution regarding how I manage my investment portfolios.
One of the questions that I keep coming across is about the potential of precious metals investments, in particular, “Is gold a good investment?” and “Is it a good time to buy gold?” These two questions have become part of a hot topic of conversation among investors in 2023.
If you have some funds set aside and you are wondering what to do with them in the face of this ever-present threat of economic meltdown, you are not alone. I have looked at several different options available to investors and I keep returning to the possibility of buying gold for investment purposes.
In this article, I will look at the various considerations you need to make before buying gold for your investment portfolio.
By the time you finish reading, you will have a better understanding of the various ways you can invest in gold, the risks involved, and whether or not the timing is right for such a big decision.
Read on to find out whether gold stocks and bonds, as well as other precious metal investments, should be on your radar in 2023.
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What Will I Learn?
- Key Takeaways for Investors
- The History of Investing in Gold and Other Precious Metals
- A Look at Gold Prices
- How Coronavirus Affected Gold Prices
- Is Buying Gold a Good Investment? The Pros and Cons
- Five Ways to Invest in Gold
- Is Now a Good Time to Buy Gold?
- Risk Factors When You Buy Gold
- Should I Buy Gold Now? Investor Self-assessment
- Is Gold a Good Investment? The Final Verdict for 2023
Key Takeaways for Investors
I am going to touch on several different things in this article, from the pros and cons of gold investments to the issue of how to invest in gold bars, coins, stocks, exchange-traded funds, and more.
However, the following are the major points I hope you will take away from this informative read:
Gold is a good investment at the right time and under the right circumstances.
When faced with market volatility and economic uncertainty, owning physical gold as a safe haven asset is the right move.
There are risks involved when you invest in gold.
Owning physical gold is not the only way to invest.
There is a lot of confidence surrounding the demand and purchasing power of gold.
A gold investment portfolio is more suited to long-term investing rather than short-term.
The History of Investing in Gold and Other Precious Metals
Gold bullion, in all its various forms, such as coins, bars, nuggets, and even gold jewelry has always been a major part of our history. From the day the first gold mining company by the Ancient Egyptians came into existence over 4,000 years ago, the gold standard has been used as an indication of wealth and power across many civilizations.
In modern times, we have a lot more options available to us when it comes to investing in gold, but the strange fascination we have for this precious metal is still as strong as it was back then. Over the centuries, the number of ways in which you can buy gold has increased, allowing more and more people to have access to it.
There have been many major events in recent history that have shaken the global economy, such as wars and economic depressions. However, while investors in various sectors have suffered great losses during this time, those who put their trust in gold investments have always survived.
As such, investor sentiment has always leaned towards gold as being a good investment. This is probably why the topic of investing in gold being a good strategy is once again being discussed given the current economic conditions we are going through.
A Look at Gold Prices
If you are going to invest in gold stocks and bonds, one thing you have to understand is how gold prices work. Regardless of the way you decide to invest in gold, be it owing gold mining stocks or buying physical gold, you always need to have the spot price of gold in the back of your mind.
The spot price of gold is the current price you can get if you were to sell or buy gold today. This value changes each day, sometimes even several times a day, but like all precious metals, it is relatively stable compared to other assets on the stock market.
To see a good return on your gold investments, you need to have bought gold stocks at a lower price than the one you plan on selling them for. That is why, when purchasing gold, always keep an eye on the gold price.
We briefly touched on how wars and economic depressions have affected investments in the past, but we had not talked about the coronavirus pandemic a few years ago and how it continues to affect the gold market.
While the stock market was brought to its knees by the global pandemic, gold stocks thrived. Not since 2012 has the gold price been as high as it was during the Covid-19 era. This is because when faced with the mounting economic uncertainty and stock market volatility caused by the breakdown of society, many investors sought the safe haven offered by the gold market.
While the past performance of gold stocks cannot be used as a guarantee that you will make money when you invest in gold, it does give investors a lot of confidence that gold is a much better option.
Is Buying Gold a Good Investment? The Pros and Cons
Whenever I have to come up with an important investment strategy, I always like to list the advantages and disadvantages of each choice before taking a step forward. This helps me shut out all the background noise caused by financial advisors who may be trying to push their own agendas.
A simple list of pros and cons is all I need to help me focus on the important facts before I decide whether or not I should buy gold stocks for my investment portfolio. Here is what I came up with regarding gold investments:
Hedge Against Inflation
If you take a look around you, you can easily tell that inflation is once again a big problem based on the high-interest rates and rising costs of services and basic commodities. You need a hedge against inflation if you are going to make it through unscratched, and nothing is better at that than gold and other precious metals.
Considered a Safe Haven
It is no longer a secret that the next few years are going to be rough for financial markets worldwide. Such global issues can easily last over a decade in the worst-case scenarios.
At such times, you will need a safe haven for your funds, and holding physical gold is one of the best ways to ensure that. Gold retains its value and liquidity even in the worst of times, making it a great way to protect your financial future.
Resists Stock Market Volatility
The volatility of the stock market is one of the things that drives many investors with a low-risk tolerance to invest in gold instead of paper asset classes.
With gold coins and bars, you do not have to always keep your eye on the screen and your ear to the ground. You can rest assured that no matter the ups and downs of the stock market, your gold futures, stocks, ETFs, and other assets will remain steadfast.
Investment Portfolio Diversification
As a long-time investor, one of the things I have learned is never to put all my eggs in one basket. Speculative investment always carries the risk of making the wrong choice and losing money in the process.
However, when you spread out your investment over a wide range of assets, you also spread the risk and better protect your funds. Many investors believe in dedicating between 5% and 10% of their portfolios towards precious metals, in particular, physical gold coins and other gold assets.
Gold IRAs Are Tax Advantaged
If you are looking at gold as a long-term investment, one of the avenues you may want to explore is that of opening a gold IRA. While you will not be allowed to hold your physical gold, a gold IRA has a lot of tax advantages that will help you grow your investment much faster.
Depending on whether you open a Roth IRA or traditional IRA, you can deposit or withdraw your funds without having to worry about paying taxes. By the time you retire, you could have a sizable nest egg to enjoy in your twilight years.
Gold Prices Can Be Volatile
While investing in gold offers a lot of stability, never make the mistake of thinking that the price of gold will not rise or fall at any time. Gold prices can also be volatile, which is something you have to consider before investing large sums of money.
If you are looking for a profitable short-term investment, gold stocks may not be the right choice for you. The price of gold will rise and fall many times, but over long periods, you will be able to enjoy a better return on investment.
No Income Generation
One thing the stock market has going for it is the potential to earn an income from your investments in the form of dividends or yields from bonds. With gold, you do not get such benefits.
Keeping Gold Coins and bars Is Risky
As one of the most valuable precious metals, gold attracts a lot of attention from criminals, fraudsters, and scam artists. As a result, there is a lot of risk associated with buying gold and keeping it at home.
Five Ways to Invest in Gold
When I decided that investing in gold was the right decision for me, I was surprised at the number of different ways to do so. I, like most people, was under the impression that buying physical gold was the only way I could invest in gold.
However, there are many ways to get into this industry. Here, I will discuss five of the best ways to invest in gold:
Investing in gold can be as simple as approaching a gold dealer and buying physical gold bars, coins, or other forms of bullion. Gold jewelry is also a great option, especially if you are looking for investments with added intrinsic value that can increase their price over time.
However, if you take this route and decide to buy physical gold, know that the gold industry is full of scammers. Have you ever heard about Fool’s Gold? Tricking unwitting gold buyers into buying fake gold coins and bars is a common practice that you need to be wary of.
Gold Mutual Funds
In the same way that ordinary mutual funds have made fortunes for investors on the stock market, so too can gold mutual funds. You can hire a brokerage firm to help you buy gold mutual funds for gold companies that produce or finance the production of gold.
Gold mutual funds work in the same way as stock market mutual funds. One thing you have to know, though, is that you may be charged very high fees for this type of investment because of the active management it requires.
A gold ETF (exchange-traded fund) is a much cheaper option than buying physical gold. You will be expected to pay less than 1% of the value of your gold ETFs as fees. If you approach the right broker, gold ETFs have the potential to be very lucrative. The ETFs can either be based on the price of gold or stocks in gold mining companies.
Gold Stocks in Mining Companies
Speaking of gold mining companies, did you know that you can buy shares and become the partial owner of a gold mine? When a gold mining company wants to raise money for expansion and other mining activities, it can sell off some of its shares to gold investors.
However, if you choose this rough, there are a lot of geo-political considerations you have to make. A gold mining company will suffer greatly if it is located in a politically unstable area, as is the case in many parts of the world where precious metal mining companies are abundant.
A growing trend among gold investors is that of opening gold IRAs. You can choose to diversify your portfolio by opening a tax-advantaged, self-directed gold IRA that will keep your retirement funds secure until you reach the age of retirement.
If you decide to open a gold IRA, you have to make sure you are familiar with all the IRS rules and regulations. A gold IRA does not have the same freedom that you get, for example, when you buy gold from a gold dealer.
With an IRA, you will need a suitable custodian to help you open the account. All the gold that you fund with the money from your IRA cannot be kept at home, otherwise, it will be regarded as distribution and you will be penalized. Also, only IRS-approved gold coins and bars are eligible for inclusion as part of your gold IRA
Is Now a Good Time to Buy Gold?
Just as important as knowing whether or not to invest in gold futures, ETFs, mutual funds, and stocks, is getting the timing of your investment right. Market volatility means that certain times are better for getting into the industry, while at other times you may be better off looking towards other assets.
When I look at what has been happening over the past few years, and consider the future projections by financial analysts, 2023 seems like the ideal time to enter the gold market. All signs are pointing towards investing in gold assets as soon as possible, if you have the funds.
Here are some of the factors that have contributed to this decision:
Increased Economic Uncertainty
It seems like each time I turn on the financial news there is an analyst predicting doom and gloom over the next few years. What started as rumors of a possible economic recession are slowly becoming a reality as the stock market continues to suffer.
This is pushing a lot of investors to seek other havens for their funds, and many of them agree that investing in gold is the best solution. How serious this recession is going to be is yet to be determined, but if you want to save yourself a lot of sleepless nights, now is the time to invest in gold.
History Favors the Gold Market
Past performance is not a guarantee of future results, but it is a very good indicator. Gold bullion has been a lifesaver for many investors in the past whenever the global economy has struggled, and there is no reason to assume that the same will not happen again.
You do not even have to go back many years to see how gold bullion can protect investors from economic uncertainty. Just look at how the stock markets have suffered since the emergence of the coronavirus in 2019.
Investors who already had gold in their portfolios benefited a lot during this time, and are still enjoying very high gold prices to this day. If things get worse than they are right now, history suggests that the wisest thing would be to make sure you have a substantial amount of funds invested in gold.
Increase in Production From Gold Mining Companies
Global gold production is predicted to increase in response to the increased demand for the commodity. If you were thinking along the lines of investing in a gold mining company, this is the best time to do so.
Mining companies require a lot of investment to meet their targets and this is where shrewd investors can cash in. If you do a little bit of research, you can find out which gold mines are opening or expanding in areas that have been identified as being rich gold belts. That means over the next few years, these mines should realize great profits.
However, always take a look at the bigger picture before investing in a gold mine. How is the political stability of the region? Are there any local problems, such as environmental concerns or worker strikes that might affect production at the mine? Such questions are important because these are issues that can make or break even the largest gold mines.
Central Banks Are Hoarding Gold
If you research global trends in terms of demand for gold, you do not need a financial advisor to tell you that many of the world’s largest economies have been buying as much gold as they can in recent years. Central banks from countries developed countries, such as China and Russia have been buying gold bullion by the ton.
This alone should be enough to tell you that buying gold right now is a good investment. Why else would such established economies be throwing billions of dollars into the gold industry if there was no future in it?
The activities of these central banks have also increased the global demand for gold, further pushing up the gold price. Considering that we are well on our way to a recession, I doubt any of these countries will change their strategy any time soon, meaning that this demand and, by extension, the high price of gold should last for quite some time.
Intrinsic Value of Gold
Gold has always had great value beyond its economic importance. It is very important in the medical and technological industrial sectors where it’s used as part of vital pieces of equipment.
There is also a greater-than-ever demand for gold jewelry in India, China, and other Asian countries, where it is used during wedding ceremonies and festivals. The expansion of the Chinese economy, in particular, means that a lot more Chinese citizens are now able to afford gold, which further increases its demand.
This intrinsic value of gold is not something that is going to change overnight, meaning you can base your decision to invest in gold on that. As long as gold continues to add real value to the world, its demand and high price will hold.
Risk Factors When You Buy Gold
Never blindly throw yourself into any new investments without first doing all your research and analyzing all the risks involved. I have learned over the years that no investment, no matter how good and profitable it is, is without its fair share of risks.
Investing in gold also comes with certain risks to the investor. However, these are risks that you can work around, avoid, or manage if you plan your investment properly. The following are some of the common risks you should know:
There is always a risk of losing money when you invest in gold due to the volatility of the gold market. However, this risk is not as much as you would be exposed to were you to invest in the stock markets.
If you are buying physical gold, there is a risk of being scammed, especially if you are still new to the industry and do not yet know how to identify false gold. You can start by dealing only with gold dealers who have earned a great reputation among investors.
Wherever there is gold, political problems arise. These are issues that will severely affect you if you buy into gold mining companies.
You need to consider the cost of storing your gold, as well as any insurance you will purchase to secure your investment. These costs can easily become very high, and if you are not careful, there is a risk that they will eat away all the profit you make from your gold investment.
Should I Buy Gold Now? Investor Self-assessment
After looking at all the pros and cons of investing in gold, as well as the risks associated with this decision, you should be able to decide whether this is the best option for you. When doing this it is important to take a good look at your particular circumstances before e you go out and buy gold.
I always ask myself the following questions as a way of assessing whether this is the right investment for me:
How much am I willing to invest in gold?
What are my future financial plans and how will buying gold affect them?
Which type of gold investment is the right choice for me?
Do I have the required risk tolerance for this kind of investment?
How much of my portfolio am I willing to diversify towards gold investments?
Am I looking for short-term or long-term investing?
You should include any other questions that you think may apply to your situation before making your decision. Only then can you decide whether investing in gold is the right choice for you.
However, you need to remember that investing in gold, like any other form of investment, requires you to be willing to take on a certain amount of risk.
No matter how much you prepare, or how much investment advice you receive, the potential of losing money will always be there. You have to be willing to take a few risks before you can enjoy the benefits.
Is Gold a Good Investment? The Final Verdict for 2023
There are few investment options that I am surer of than gold in the current economic climate. As things stand, the world is gearing up for a difficult few years ahead, and 2023 seems like the ideal time to start trading, buying, and investing in gold.
While the risks will always be there, all the signs seem to be pointing toward the fact that if you have not yet started thinking about how to get into the gold industry, time is not on your side. Do your research by reading articles similar to this one, and decide which form of gold investment is best for you.
It is no longer a question of if your gold is a good investment, but how you can also be part of this rapidly growing industry to secure your financial future.