A lot of people consider it old-fashioned and out-dated. But in fact, there are many reasons to invest in gold, even in a time where so much in our life is digital and where the biggest investment gains seem to be found in tech and tech related (i.e. cryptocurrencies like Bitcoin and Ethereum).
That’s because gold thrives in uncertain times. We think it’s safe to say that today’s America is very uncertain indeed.
That’s why many of our wealth protection planning clients have gold (and other precious metals to some degree) in their plan.
Why? Because it offers some benefits you simply can’t get elsewhere. Here’s how…
Terms You Should Know
Bullion refers to physical gold, silver, platinum, and palladium of high purity. It is often kept in form of bars, ingots and coins. Precious metals can be bought, stored, and sold here in the US and in most countries overseas.
Numismatic gold and silver coins are collectible coins that hold more value than the current market price of gold or silver. This is due to rarity, condition, and collector interest, among other factors. For strict investment purposes, this is not the best way to invest in gold.
Online Precious Metals Platforms (American or non-US). No personal visit is required to buy, sell or even store precious via these platforms.
Shares of Companies that Mine Gold: Mining is a capital-intense business. Which means there are a lot of companies from early stage explorers (who aren’t mining but are looking for new potential mines) through to well-established international businesses with mines around the world. This is a great way to get exposure to the gold price, but it’s not a gold investment in the traditional sense.
Exchange Traded Funds (American or non-US ETFs) are publicly traded securities and can be bought directly from your brokerage account. Again, though, this gives you exposure to the gold price if you think the metal is going up. But if you’re interested in an investment in gold for safety and security, there are better options.
Top 10 Reasons to Invest in Gold
#1: It’s held its value for more than 5,000 years (and counting).
The first firm evidence we have as to the human use of gold comes from ancient Egypt. Starting around 3,600 BC, Egyptian artisans began making jewelry from gold. The earliest use of gold as a circulating currency came around 600 BC by the Lydian king Croesus.
Using gold for this purpose and for international trade made a great deal of sense. Gold is scarce and doesn’t degrade.
#2: When the market goes down, it tends to go up (or at least doesn’t go down).
When stocks and bonds go down, those losses are often offset by a rise in the price of gold. This effect is something called “negative correlation” and offers diversification that a lot of other investments simply can’t offer.
#3: Investing in gold protects against inflation.
It’s a useful hedge against inflation. Gold thrives during times of economic uncertainty.
#4: It’s a “real” investment that doesn’t suffer from counterparty risk.
So many of our investments — stocks, bonds, funds, even crypto — are controlled by people and systems who could rob us of our property under the right circumstances.
Physical gold, on the other hand, is a real thing. We own it. It’s ours. And it’s something that can’t be taken away from us when a bank or broker fails.
#5: Gold has an excellent track record.
As we know, currencies can swing wildly. Gold tends not to do that. Compared to other tangible things, it holds its value. That makes it a reliable store of wealth.
#6: Physical gold cannot go broke.
It’s not a stock, bond or alt-coin. Under any set of circumstances we can imagine, physical gold will always have some value. It simply can’t go to zero.
#7: Gold is a useful industrial metal.
It is an extremely efficient conductor, making it irreplaceable for a wide range of electronics include your phone and computer. In some ways, investing in gold is a bet on the health of the economy… albeit without the same volatility as betting on tech directly.
#8: Liquidity.
Gold can be easily bought and sold. Of course, this is easier if you work with a firm that will buy, store, and then sell it on your behalf. But even if you buy a few recognized coins from a coin shop, you’ll always find a ready buyer somewhere.
#9: Gold can’t be hyper-inflated away.
At any time, the Fed can create as many new dollars as they like and set the stage for massive inflation. That can’t happen to gold.
Pulling the metal out of the ground is a slow, painful process. Although technology keeps getting better, the introduction of new gold into the system is pretty consistent at about 2% a year. (Total gold production / total gold mined)
That caps the “inflation” of the gold supply. Try as they may, it will be very difficult for governments to change that.
And keep in mind that we are using this gold in industry. So what’s actually available to investors is quite a bit less.
#10: There are lots of different ways to invest in gold. (i.e. it’s easy.)
It really depends on your preference, outlook, and purpose of having gold as part of your wealth protection plan.
Here are some of the most popular options:
- Exchange Traded Funds (ETFs): This is the simplest way to get exposure to gold. However, with most ETFs, you can’t claim the metals backing the fund. In that sense then, you’re not really investing in gold. You’re simply gaining access to price changes in gold. One ETF that does give you physical access to gold, though, is the Sprott Physical Gold Trust (NYSE:PHYS).
- Bullion coins and bars (domestically or internationally): From a local coin shop to dedicated online sellers; both within the US and in certain trusted locations internationally. For us, when sourcing metals offshore, we work with respected dealers in Canada, Great Britain, Switzerland, Austria, Australia, New Zealand, and Singapore.
- Online Precious Metals Platforms (domestically or internationally): There are many options out there ranging from online precious metals dealers who will buy, store, and sell real metals on your behalf, to platforms that let you buy a “share” of a real bar of gold in their vault, but with restricted ability to claim it.
- Shares of gold miners: This is not an investment into gold in the traditional sense, but more of a bet that the price of gold will go up. If so, then the best way to ride that price up is through shares of gold miners. But you will have to be comfortable with volatility, especially if you’re buying individual stocks. You can also buy gold stock ETFs. VanEck Vectors Gold Miners ETF (NYSE:GDX) and VanEck Junior Gold Miners ETF (NYSE:GDXJ) are two popular options.
Considering buying gold coins or bars for investment?
Here you can find more information on best gold coins to buy and best gold bars to buy.
Which option is best?
It really depends on your goals.
If you think the price of gold is going up, and you want to keep fees low, getting exposure to the price through an ETF is simple and easy. You could also purchase through an online precious metals platform like BullionVault, which will purchase real metals on your behalf and store it in their vaults.
But if you’re buying as a hedge against inflation and a safe way to protect your wealth, then you will want to cut out as much risk as possible. In that case, you’re best either buying it yourself in physical form (1oz gold coins and/or recognized bars are best) and storing it in a private storage facility.
But we also like the idea of having some gold close to home where you can gain access to it quickly. Buy it in physical form (one ounce or even smaller fractional gold coins are best) and store it at home in a fireproof safe (ideally embedded in concrete) or in a nearby private storage facility.
What About Gold Storage
Okay, so you’ve decided to buy gold. But how to store it? Feel free to see our primer on how to store precious metals.
What does Wealth Protection have to do with investing in gold?
Since 1984, we’ve helped more than 15,000 customers and clients protect their wealth. For its proven record as a wealth preservation, gold has often been a part of that planning.
If you’re interested in using gold for the same purpose, and aren’t quite sure where to start, please book a free, no-obligation call with one of our Associates to see if a wealth protection plan is right for you.
