In times of economic adversity, investors often seek strategies to fortify their financial positions and weather the challenges. The desire to safeguard assets in volatile financial markets is universal. Hence, the question arises: How can investors establish their financial stability to achieve increased financial independence?
As a safe-haven asset, gold gives investors the opportunity to take a measure of control over the financial destiny of their portfolio. While the U.S. dollar sets the tone for the global markets, gold is still the tried-and-true backbone of the world economy. There’s a reason the vaults of Fort Knox contain about 147 million troy ounces or about half of the U.S. Treasury’s gold reserves. This guide will break down how you can leverage gold investments as part of a sustainable wealth-building strategy.
Is Gold a Good Investment?
How is a good investment measured? Can it be determined just by looking at the return on investment and capital gains earned? Is it based on predictability and stability? When evaluating a singular investment, investors may want to consider how it’s part of a larger whole. Gold investments provide built-in risk management. Here are a few reasons to allot 5-10% of your portfolio to gold investments:
Safe Haven Asset
Safe haven assets provide investors with reassurance regardless of what’s happening in the market. These investment types can offset market risk to your portfolio by limiting its exposure to negative shocks. Moreover, in the event of an economic downturn, safe haven investments generally outperform the bulk of financial markets.
As a safe haven asset, gold’s value remains buoyant throughout volatile market turbulence. When stocks, bonds, mutual funds, and real estate investments experience the brunt of a correction, gold prevails. It can even act as a hedge against inflation when the U.S. dollar depreciates.
Many of us may grow up hearing but not fully appreciating one piece of financial advice: “don’t put all of your eggs in one basket.” Diversification is a fundamentally strategic wealth-building tool as it helps mitigate risk. In essence, it is a proactive form of loss prevention. By taking decided measures to build a portfolio with different types of investments, your portfolio does not become dependent on how a singular asset performs.
Gold provides fortified diversification to your portfolio since its value is not positively correlated with other assets. That means when the prices of other assets decline, gold’s stable or increasing prices can maintain your portfolio’s equilibrium throughout an economic crisis.
Gold still plays by the market rules of supply and demand. It is a tangible and finite commodity. Long gone are the days of the Gold Rush, where it seems the rivers were teaming with speckles of this yellow shimmering metal. Now, cumbersome gold production via mining has created supply constraints. Demand for gold is still high, especially in the face of an ongoing inflation surge and the precarious economic fallout caused by the Russia-Ukraine conflict. All in all, the signs point to it’s very likely that gold will continue to maintain or possibly exceed its store of value.
How to Buy Physical Gold
When you think about physical gold assets, what comes to mind? Do you see a glowing treasure chest of motley chains and jewels? Does a neatly stacked pyramid of bars peeking from behind a vault come to mind? Perhaps you envision collectible gold coins imbibed with wishful thinking that they’ll have a coveted and mysterious value. Gold investments can have a certain inherent romanticism, but there is also a greater practicality to investing in physical gold. Here are a few ways you can buy or sell physical gold investments:
Gold bars can also be referred to as bullion or ingots. Brick-sized is not the only investment option available. Gold bullion bars can be purchased by the gram or ounce, with smaller bars ranging from 1 gram (.032 troy ounces) up to 12.4 kilograms (400 troy ounces). Each bar should be inlaid with a description of its purity, the manufacturer, weight, and other details needed to verify its value.
It’s important to note that investment-quality gold bars must be at least 99.5% pure gold. Smaller gold bars provide a good investment entry point and offer greater liquidity. Larger bars have better premiums (think buying in bulk) and work better as a long-haul investment.
Gold coins can mainly be held in two capacities: as bullion investments or as collectible assets. Sometimes, there is overlap. Gold bullion coins are intended to provide investors with a feasible market entry point for precious metal investing. Rare collectible coins are priced beyond the intrinsic value of their metal content. The value of these coins is determined by their numismatic appeal. Demand, coin grade, mintage number, purity, condition, and other variables that increase coin desirability can also increase the coin’s appraised worth.
Gold jewelry is another way to invest in physical gold. Typically, gold jewelry comes with premiums that, ounce for ounce, are higher than the actual amount of gold you’re getting. It all depends on the manufacturer. Just be sure to check the quality or purity, measured in karats, to make sure you aren’t investing in fool’s gold.
Lastly, as markets have evolved, the ways you can invest in non-physical forms have emerged as well. Gold ETFs, futures, and other derivatives are intangible gold alternative assets.
The U.S. Gold Bureau — Your Trusted Precious Metals Dealer
Investors should always do their due diligence and make sure they are purchasing gold investments through a reputable, trusted precious metals dealer. The U.S. Gold Bureau takes it a step further by providing above-and-beyond service with our knowledgeable Precious Metals Experts. We are fully compliant with governing bodies of the precious metals industry, and all of our inventory comes with proof of authenticity.
Call us today at 800-775-3504 or chat with us live to find out how you can create a sustainable wealth-building strategy through gold investments.