Gold investing in 2023: What to know before you buy

If you're like many Americans, you may be experiencing a tumultuous year when it comes to your finances. Between high interest rates and inflation to worries about a recession and volatile markets, plenty of investors are seeking a bit of stability as the year goes on. 

For some, that can come in the form of gold. As a historically recognized store of value and hedge against inflation, gold can be a good way to diversify your portfolio this year and in the future. But to make the most of your gold investment, it helps to know exactly how you can benefit from gold, the best ways to use it and mistakes to avoid.

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Gold investing in 2023: What to know before you buy

Once you've decided to invest in gold, make sure you know these things before you make your gold purchase.

How much to invest

The amount of your portfolio you allocate to gold is a big factor to consider. While gold can be useful, it's important not to invest too much.

Generally, experts recommend investing no more than 5% to 10% of your overall portfolio into gold. While the precious metal has many benefits, it's not a great way to grow your wealth. You'll want to keep the majority of your portfolio allocated to traditional stocks and bonds while using a balanced gold investment to weather periods of downturn and minimize your losses when other assets are in turmoil.

Ways to invest

With multiple different ways to invest in gold, you should consider which type is best for you. 

Physical gold in the form of bars or coins is one option. You can buy online or in person from a reputable seller in the amount you want. But you will need to figure out how you'll insure and store your gold. If you're more interested in indirect access to the gold market, you may instead choose to invest in gold ETFs or gold mining company stocks, which you can access through your regular brokerage.

Another way to invest in physical gold is through a gold IRA. With this type of self-directed IRA, you can invest qualifying physical gold assets for retirement. Typically, you'll go through the process with a gold investment company, which can help you buy your gold and find an IRS-approved custodian.

Explore all the ways you can invest in gold today with a free investors kit.

Investment timeline

In general, gold is great for long-term investors with a substantial investment timeline ahead of them. 

Historically, gold has proven to be a stable store of value, though it does have short-term fluctuations. For example, gold's price per ounce has increased from about $1,300 to above $1,900 over the past 10 years. But in that time, it's also experienced prices as low as $1,060 and as high as $2,070. In 2023 alone, gold's price has moved between just over $1,800 per ounce to more than $2,000 per ounce while overall remaining relatively steady near $1,950.

If you're investing for the long term, you can reap the benefits of gold's overall growth and stability without worrying about timing your investment when short-term price changes occur.

Gold's role in your portfolio

Like any new investment, you'll want to evaluate how gold fits within your broader investment plan. 

For example, you might value your gold investment most for its ability to hedge inflation. This helps you maintain your purchasing power when the U.S. dollar slides. Or, your portfolio may be significantly focused on risky stock investments, and gold is most valuable to you as a safe haven when those stocks face a downturn. Some people may also turn to gold for its liquidity since, as a widely-recognized currency, you can easily convert it to cash when you need it.

Over time, your needs and overall portfolio may change, and how you invest in gold may, too. You might buy more before an economic downturn, for example, or decide to focus more on income-earning assets as you approach retirement.

If you're unsure how to best fit gold within your financial plan, consider speaking with an expert, like a financial advisor, before you buy.

The bottom line

If you're thinking about investing in gold today, doing a bit of research into the precious metal and its benefits can help you maximize the value it adds to your investment plan. Before you buy, make sure you know how much of your portfolio to allocate to gold (starting small), what type of gold you'd like to buy, your overall investment timeline and exactly how to best utilize gold to help meet your financial goals. 

With these things in mind, you can begin your gold investing journey today. Start by learning more about the options available for you with a free investment guide.