Is Investing in Gold a Good Idea?

One thing all precious metal investors have always known is that there is real value in the gold market. When it comes to secure investments that can withstand even the worst political and economical turmoil, gold bullion is right up there with the best of them.

This is why many financial advisors will tell their clients to buy gold if they are in doubt about the direction the global economy is headed. However, few people know that there are so many different ways one can invest in gold. These are:

  • Buying and keeping physical gold

  • Investing in gold mining stocks and bonds

  • Buying shares in gold mining companies

  • Trading gold exchange-traded funds (gold ETFs) and gold futures

  • Opening a precious metals IRA investment portfolio

And perhaps the best, yet most under-utilized strategy is converting your 401k to physical gold.

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A Quick Look at the History of Gold Bullion

Is Investing in Gold a Good Idea

Owning gold has been an obsession that dates back to the days before recorded history. Of the many wars that have been fought over the years, wealth in the form of gold bars and coins has been behind a lot of them.

It was around 2000 BC when Egypt, one of the most powerful civilizations of that time, started actively mining gold. Since then, as gold mining companies have developed better mining techniques, the supply of gold has increased drastically.

However, the demand for gold has always been far greater than its supply, a factor that has contributed to maintaining the gold price at a high level over the centuries.

Historically, in times of turmoil, such as the Great Depression or the World War, the frenzy to buy gold often escalates dramatically as people lose faith in the political and economic structures in place.

Recently, the coronavirus pandemic has shaken the global economy to the point that the need to purchase physical gold has started to grow around the world again. If the global economy continues this way, owning physical gold may be the best option for everybody.

However, the question remains; “Is investing in gold a good idea?” Those looking ahead to 2023 should consider the reasons for investing in gold that has been outlined in this article.

–> Suggested Reading:  Is Precious Metals Investing a Good Idea?

Gold Coins Give Portfolio Diversification

Financial markets are edging closer and closer to the brink of collapse. Stocks, bonds, ETFs, and other asset classes are becoming riskier by the day. When one can no longer trust the stock market, where does one turn to?

The answer is to consider a gold investment. A diversified investment portfolio based on gold stocks and other financial assets is the best investment strategy when trying to spread the risk and protect your funds.

Constant Demand for Physical Gold

No matter how high the gold price gets, people will still buy it. Central Banks in many nations, such as Russia and China are dedicating billions of dollars to buy gold. Other countries, such as India are witnessing record demand for gold jewelry during the wedding and festival seasons.

On top of that, gold has actual intrinsic value, thanks to its uses in industry and technology. All this has contributed to creating and maintaining a high demand for the precious metal, making gold a good investment opportunity.

Supply Issues

A large portion of the gold in circulation today came from the vaults of various central banks across the globe. However, this supply chain was severely diminished in 2008 when the poor forecast for global economic recovery caused many nations to start buying gold instead of selling it.

This was accompanied by the slowing down of production in many gold mines. The result was that demand continued to pull further and further away from gold supply, making the yellow metal more sought after than other precious metals.

Geopolitical Uncertainty

Historically, the discovery of gold in any area always leads to a huge political upheaval, especially in 3rd-world countries. When this happens in a major gold producer, such as South Africa, the global supply is affected and the price of gold rises.

Deflation Protection

When deflation happens asset and consumer prices go down over time and the purchasing power increases. This might sound like a very good thing but in reality, it is not.

The market will suddenly be flooded with too much fiat currency and not enough goods to go around which will reduce the value of cash. This means it is better to have part of one’s funds secured with gold assets.

Hedge Against Inflation

While many other types of investments will suffer huge losses in times of inflation, gold coins, and gold stocks will do very well. This means the value of having a gold coin will increase as inflation gets worse and worse. That is why gold is considered a hedge against inflation.

Weakness of the US Dollar

The US dollar is widely regarded as the most important of all fiat currencies when it comes to international trading. This means that when it weakens, as it did between 1998 and 2008, all the people who were holding on to the dollar will suddenly feel the heat and start trying to offload their dollars.

As a result, as the dollar falls, more people will buy gold and other precious metals. Considering that similar trends are being forecast over the next few years, this makes gold a good investment from 2023 onwards.

History of Steady Gold Prices

Gold investment has always been a reliable option over the years. Even though the price of gold increases and decreases on an hourly basis, looked at as a long-term investment, the data is quite favorable.

The past performance of the gold price shows that if you were to hold on to gold for a few years you will likely make a good profit regardless of rising inflation or other such economic problems.

Final Thought

It would take a lot for a gold investment to end up losing money in the long run. Such is the certainty one gets when looking at gold’s history. In the face of a financial crisis, such as the one we are likely to experience in the future, the reliability of gold’s price and value may be the only safe haven we have.

Goldco