As an investor, sometimes it makes sense to branch out and try new assets. Stock market volatility has been high over the last year, inflation has been high, and it’s been a tough time for investors who are trying to grow their savings into something bigger.
Given the challenges faced in other areas of the market, you may be looking at gold bullion prices and wondering if it’s an asset that promises growth. As of early 2023, prices were up nearly 50% compared to five years ago, and late 2022 saw prices rebound after taking a dip over the summer.
Instead of giving in to impulse trading on the volatile market, you need a plan. Impulse trading can lead to costly mistakes, and younger investors are significantly more likely to make those mistakes.
If you’re looking for an investment with growth potential but you don’t want to go in blind, it’s time to learn more about gold bullion and whether or not it belongs in your portfolio.
What’s the Best Way to Buy Gold?
There are several ways to buy gold, and each fits a different personality and preference.
These are the basics:
- Physical gold bullion that you buy from a bullion dealer. Dealers like Global Bullion Suppliers offer products like bars and coins that you can store in a safe at home or with a third party.
- Exchange-Traded Funds, where you invest in a fund that itself owns gold. This is a good option if you don’t mind paying management fees and don’t want to hold physical bullion.
- Mining company stocks, which may not always follow the price of bullion and depend highly on the performance of the company itself.
Physical bullion is a very popular option for investors who want to take advantage of one of gold’s most unique qualities: the ease with which you can keep direct control over it.
Does Gold Make Sense in Your Portfolio?
The answer to this depends largely on what you already have in your portfolio. You should never over-invest in any single asset. Doing so can overexpose you to a certain type of risk. However, that applies as much to stocks as it does to gold.
If your portfolio is in need of diversification, gold bullion offers some unique properties that can be useful when other parts of the economy are struggling.
Investor sentiment is very positive around gold as an anti-inflationary asset. Gold’s value has historically kept up with the cost of living, making it a good asset for a defensive position.
Inflationary practices (such as quantitative easing) that increase the money supply tend to be used to get through recessions. It’s one of the reasons gold prices tend to fare better than stocks during a recession. There is a finite supply of gold in the world, and a rising money supply increases the value of that scarcity while undermining the value of cash.
A position in gold can be a very useful way to ride out tough economic circumstances. If you already own a mix of stocks and bonds, gold can fill a niche role that excels during recessions and periods of inflation.
