Economic analysts say the effects of the pandemic could put a dent in the hard-earned savings of citizens around the world. The stock market is crashing, the housing market is declining, currencies are devalued, and we’re entering the heard of the recession.
So, what’s an astute investor to do?
Some experts suggest that you should invest in gold during the recession.
Gold can come in physical forms like coins or it can be directly inserted into your IRA as part of a diversified portfolio. Either form can potentially protect investors from severe economic headwinds.
Gold is a protected form of wealth that can help you maintain your grip on reality in the event economic conditions turn sour. It comes in both physical form such as coins or bullion, or through investment options like IRAs and 401ks.
Either form of investment may help provide downside protection against severe global inflation rates.
Let’s take a closer look at some reasons to invest in gold during the recession. Whether you’re looking to add gold to your investment portfolio or simply curious about its value, read on for more information!
Reasons to Invest in Gold
As the global economy continues to slump, more and more people are looking for safe haven investments. For many, that means turning to gold.
Here are 10 reasons why now may be the perfect time to invest in gold:
- It’s easy to access, store and sell.
- It’s a tangible asset you pass down through generations.
- It’s not tied to a specific country or government.
- It’s been used as a currency for centuries due to its intrinsic value.
- It performs well during periods of economic uncertainty.
- It can help with inflation.
- It’s not positively correlated with the stock market.
- It allows you to keep your financial privacy.
- It can diversify your portfolio.
- It hedges against the devaluation of currencies.
Let’s dive in and explore each reason to invest in gold in more detail.
10. Easy Access, Storage and Liquidity
Precious metals like gold are tangible assets that are portable, liquid (aka easy to sell), easy to store, and confidential.
It’s easy to transport, so it can be moved quickly and easily if necessary. Gold is a highly liquid asset because it is both globally traded and has a low unit value. For example, an individual can purchase a small quantity of gold without affecting the market price. The global demand for gold ensures that buyers will always be available.
Additionally, gold can be easily melted down and traded in any form, which makes it ideal for use in jewelry or other commodities.
Plus unlike other resources such as oil, gold doesn’t degrade or corrode, has a very long shelf life and doesn’t require any special storage conditions.
Gold can also be stored in smaller amounts than other precious metals, making it ideal for investors who want to buy and sell in small quantities. The fact that you can store it physically gives savers greater control over their money and a feeling of confidence.
9. Tangible Asset Class That’s Easy to Pass On
Gold is a physical representation of wealth that can be passed down through generations.
It can be stored in various physical forms, including:
- Bullion
- Coins
- Bars
- Ingots
- Jewelry
Gold is a good physical asset to own because it’s rare, durable, and difficult to produce. The metal has inherent value, so if you own gold, you can essentially store your wealth in a physical form and pass it along to future generations.
By accumulating physical gold, one can build a pool of assets that are giftable to family members. The same cannot be said for investing in gold ETFs.
Gold ETFs are a convenient way to invest in gold, but they have several drawbacks. For one, you don’t actually own the gold. The gold is stored in a vault and you own a certificate that says you’re entitled to the gold. If there’s ever a problem with the vault or the company that owns it, you may not be able to get your gold back.
Another downside of ETFs is that they can be subject to government seizures or forced sales in times of crisis. Gold is considered a safe-haven asset and people tend to buy it when there’s turmoil in the markets. This can drive up the price of gold ETFs, making them less attractive investments than physical gold.
8. A Global Currency
Gold is a global currency that is not tied to any specific country or government. It’s accepted in most countries around the world and has been a global medium of exchange for many centuries.
Because gold is abundant enough to create coins but rare enough so that not everyone can produce them, it has been an ideal form of currency throughout history.
It has value because people believe it does, and its worth is determined by the market.
Governments may try to control its value by stockpiling gold or setting prices, but in the end, it is the market that decides how much gold is worth. That’s why gold prices can be so volatile — they are based on what people are willing to pay for them.
7. Time-Tested Asset With Intrinsic Value
Gold has been used as a form of currency for centuries.
Gold and silver are considered some of the world’s most trusted assets. Precious metals are timeless, universally admired assets with intrinsic value for the following reasons:
- It doesn’t corrode or tarnish
- It has a very low reactivity to other elements
- It’s non-toxic
- It’s scarce
- It has a relatively low melting point so it can easily be turned into coins or jewelry
- It is an excellent conductor of electricity which makes it perfect for use in electronic devices
- It has a unique color that never fades and is highly sought after by people all over the world
Anytime you want to convert gold into cash, you can go to a bank, dealer or jeweller and trade it in. The value may fluctuate, but given that gold is a scarce resource and has intrinsic value, you can rest assured knowing you can swap it for other assets at any time.
6. Performs Well in Economic Uncertainty
The value of gold tends to rise during periods of economic uncertainty.
This is because it is a valuable resource that is not tied to the performance of any particular economy. This makes it a safe haven during recessions or during periods of inflation.
When the stock market is volatile and investors are looking for a stable investment, gold prices tend to rise as people flock to the precious metal in order to protect their money. Gold is seen as a reliable investment due to its scarcity, inherent value the fact that it has been used as currency for centuries.
Gold is also less volatile than other investments, making it a more stable option for those looking to protect their money.
For this reason, physical gold is a popular investment for retirement savers who want to potentially offset portfolio losses due to economic stresses and gain a little more confidence in the future.
5. Inflation-Proof
Gold is not subject to inflation like many other forms of currency.
Gold is resistent to the powers of inflation because it’s a finite resource and there is only so much of it in the world. The laws of supply and demand will always keep the price of gold stable because people will always want to buy it as a store of value. It’s is a good investment during times of inflation because it retains its purchasing power.
When prices for goods and services increase, the value of money decreases. This means that if you have saved up a certain amount of money, it will buy you less than it would have before inflation occurred.
However, gold does not lose its value in times of inflation; in fact, it often increases in value. So if you invest in gold during times of inflation, you can be sure that your investment will still be worth something when prices start to go back down again.
4. Inversely Related With Stocks
Gold is one of the few assets that are not positively correlated with the stock market.
Gold prices have an inverse relationship with the stock market. When the stock market is doing well, gold prices go down because investors are more willing to invest their money in stocks instead of gold. And when the stock market is doing poorly, gold prices go up because investors sell their stocks and buy gold as a safe investment.
In other words, is often seen as a hedge against inflation and economic instability, which is why it tends not to be positively correlated with the stock market. This makes gold a good investment for those who want to minimize their risk exposure.
3. Financial Privacy
Gold is a great way to protect your financial privacy because it is an asset that isn’t tied to any particular country or financial institution. This makes it difficult for governments or other institutions to track your gold holdings.
Additionally, if you purchase physical gold, you can store it in a safe place outside of the banking system. This prevents anyone from being able to freeze or seize your assets if they come after you. Gold is also a good investment for privacy because it has been historically stable in value and is not as volatile as some other investments.
Another important point to consider is that 86% of global central banks are developing or have developed their own digital currencies. These include not only the Federal Reserve but also China’s digital yuan which was launched last year, as well Europe’s new EBA that will soon go live with its Eurozone currency.
While there may be some benefits of digital money, some are questioning the motives behind the push to a digital economy.
One downside for libertarians will be governments having the ability to track the spending habits of citizens.
Owning precious metals gives retirement savers an asset outside of the financial and banking systems that’s a lot more private.
For those who worry about worldwide government control over their finances, it may make sense to own gold as cash purchases outside of a tax-advantaged retirement account.
2. Diversification of Assets
Gold may be used as a unique, often-effective diversification for investments or retirement savings.
A good diversification is key to reduce the risk of an individual stock investment. When an investor spreads their money across different stocks in different sectors, they are essentially minimizing their risk. For example, if Investment A performs poorly, Investment B may still do well and offset some of the losses.
Diversification can also be achieved by investing in different asset types such as stocks, bonds, and real estate. By spreading your money around, you protect your downside in cases where one sector or type of investment experiences a downturn. Of course, there is no guarantee that all investments will perform equally well all the time; but overall, a well-diversified portfolio should minimize your risks while maximizing your potential for returns.
Over the past few years, the price of gold has increased significantly, making it a good investment option for those looking to diversify their portfolios. Gold is a safe investment choice because its value is not tied to the performance of the stock market or other economic indicators.
Additionally, gold is extremely durable, can be stored safely in a variety of locations, and is a valuable commodity and has been used as a form of currency throughout history.
1. Hedge Against Inflation and Currency Devaluation
Gold is a great way to invest in the event of an economic collapse. It’s not flashy, but it has staying power and can help keep your purchasing power steady during difficult times when other investments are losing value rapidly because they’re based on hyperinflation or inflationary pressures rising at alarming rates.
The 1970s were a difficult time for many people. The inflation rate averaged 5% per year, and skyrocketed to more than 13% by 1980. But during that decade, there was an increase from $35 to over $850 in the value of gold!
Just because gold has typically performed well during times of inflation doesn’t necessarily mean it always will. But with trillions in retirement savings already wiped out this year from the stock market, it’s worth considering as an alternative investment source.
Here are some of the factors that are currently affecting the value of the US dollar:
- Inflation. A chronic inflation rate of 3% can drastically affect the purchasing power of a retirement saver. U.S. inflation is currently at 7.5%. If it were to remain that high for 20 years, for example, you would require more than $2 million in savings to equal the purchasing power of your $500,000 today.
- Quantitative Easing (QE). For the last 15 years, the U.S. monetary policy has been highly accommodative. From the time of the Great Recession through to September 2021, the Fed grew its balance sheet from $870 billion to $8.5 trillion. The nation’s M2 money supply grew nearly 36% from just December 2019 to August 2021. Now that a higher level of inflation has taken root, the central bank is changing course and tapering asset purchases as it raises interest rates.
- National debt. The national debt recently rose above $30 trillion. Many factors have contributed to this ballooning of the debt, including government spending enabled by extensive periods of accommodative monetary policy.
- Government Spending. The reduction of dollar strength and retirement savers’ purchasing power can be a direct result of government deficit spending. That can be particularly true when deficit spending is enabled by a Federal Reserve that not only keeps interest rates exceptionally low but itself purchases a good portion of that debt. Currently, the Federal Reserve owns roughly 30% of the national debt. The government’s unlimited money-printing policies and growing debt levels could be increasingly concerning to foreign markets, which could, in turn, lead to even further weakening of the dollar.
Inflation is currently at a 40-year-high. Leading economists are suggesting inflation could remain high for several years to come.
However, there is still time to use effective diversification to potentially offset harmful effects of economic influences that weaken purchasing power.
How to Invest in Gold
If you’re interested in investing in gold, the one way to do so is by buying gold coins or bullion. You can buy gold from dealers or financial institutions, or you can purchase it online.
Coins are typically minted by governments and have a face value (e.g., $5), while bullion is unrefined gold (bars, ingots, etc.). The advantage of buying coins is that they’re easier to sell and tend to be more liquid than bullion. However, the premiums over the spot price of gold are usually higher for coins than for bullion.
Another way to invest in gold is through gold exchange-traded funds (ETFs). With an ETF, you don’t own physical gold; you own shares in a fund that invests in gold. The advantage of an ETF is that you can buy and sell shares just like any other stock. And because ETF prices track the price of gold, you don’t have to worry about buying at a premium.
You can also invest in gold mining companies.
Make sure to research the best options for you and always consult with a financial advisor before making any decisions.
Frequently Asked Questions About Investing in Gold
Why would gold be a good investment?
Gold may be a good investment for many investors because it’s a finite resource with intrinsic value and has been used as a form of currency for centuries. Gold is also durable, meaning it doesn’t corrode and is easy to trade. It also has a relatively low volatility, making it a stable investment. Finally, gold is often seen as a safe haven investment during times of economic uncertainty. The benefits of investing in gold are consistent but also relative to each individual’s personal financial situation and long-term goals. Always be sure to check with your financial advisor.
Is buying gold a good investment now?
Whether buying gold is a good idea or not depends a lot on your investment goals and financial situation. If you’re looking for a long-term investment, gold is a solid choice. However, it’s important to remember that gold prices can be volatile at times, so it’s important to do your research before investing.
Gold is often seen as a safe investment during times of economic instability, so many consider it a way to de-risk.
If you’re considering buying gold, be sure to consult with a financial advisor to get their professional opinion and make sure you’re aware of all the risks involved.
Should I buy silver or gold?
There is no one definitive answer to this question. It depends on a variety of factors, including your personal financial situation, investment goals, risk tolerance and the overall market conditions.
Here are some things to consider:
– Silver is typically less expensive than gold, making it a more affordable option for investors.
– Gold is seen as a more stable investment than silver, and has historically been less volatile in terms of price fluctuations.
– Silver can be used for industrial purposes, while gold is mostly used for jewelry and investments.
The Bottom Line
In short, gold remains an excellent investment option and there are many reasons why it should be a part of your investment portfolio. It’s easy to access and store, it has intrinsic value, it performs well during periods of economic uncertainty, and it can help with inflation. Gold also allows you to keep your financial privacy and diversifies your portfolio. So, if you’re looking for an asset that is not tied to a specific country or government and has been used as currency for centuries, gold may be the perfect investment for you.
Leave a comment below and let us know what other reasons you might invest in gold. Have you invested in gold? If not, why not? We’d love to hear what you think!
P.S. Like this article? You may also enjoy these other articles in the series:
