6 things to know before investing in 1-ounce gold bars in 2024
When it comes to building a well-diversified investment portfolio, many investors turn to gold to help offset some of the risks from traditional assets, like stocks. That strategy makes a lot of sense. The stock market can be vulnerable to economic fluctuations, and sudden downturns can result in hefty losses.
But gold prices tend to increase when the market is facing a downturn, counteracting some of the potential stock losses you may otherwise face. And, considering that we're facing any number of economic uncertainties currently — from persistent inflation to geopolitical strife — adding gold or another reliable store of value to your portfolio could be more important than ever right now.
That said, there are various forms of gold investments to choose from, including gold bars and coins, gold exchange-traded funds (ETFs), gold stocks and gold individual retirement accounts (IRAs). But 1-ounce gold bars in particular have grown in popularity recently due to the convenience and liquidity they offer. Before taking this avenue, though, it's crucial to understand several key aspects of investing in 1-ounce gold bars this year.
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6 things to know before investing in 1-ounce gold bars in 2024
There are a few things that you may want to know before investing in 1-ounce gold bars this year, including:
Your diversification plan
Diversification is a cornerstone of any robust investment strategy. While gold can add diversification to your portfolio thanks to the unique benefits it offers, like inflation hedging, it's crucial not to put all your eggs in one basket. In fact, while gold is a useful investment tool, most experts recommend that experienced investors allocate no more than 10% of their portfolios to the metal — and suggest that beginners limit that amount to between 3% and 5%.
How much you invest in, though, is a decision that should be based on your unique investing goals, budget and other factors.
That's because gold's value can be influenced by various factors, including geopolitical events, interest rate changes and currency fluctuations. So, while 1-ounce gold bars can be a valuable addition to a diversified portfolio, it's important to balance your investments across different asset classes to manage risk effectively.
Find out more about how to get started with gold investing.
The storage and security requirements
When investing in physical gold, storage and security become paramount considerations, as it's important to keep your assets safe from theft or other security issues. And, while 1-ounce gold bars are compact and relatively easy to store, investors must decide between the different storage options — like keeping them at home, utilizing a safe deposit box or using the services of a secure storage facility.
Each option comes with its own set of costs and risks, so it's crucial to weigh the pros and cons based on your individual circumstances and risk tolerance before investing.
The associated costs
When investing in physical gold — whether 1-ounce gold bars, gold coins or another type of gold bullion — you will often face additional costs beyond the spot price of gold. These costs will typically include fees like manufacturing premiums, dealer markups and transaction fees.
So, before investing, it's essential to research and compare prices from different gold dealers to ensure that you are getting the best value for your investment. Each dealer will typically tack on its own set of fees to physical gold transactions, so you may be able to save money by shopping around. You should also be mindful of any taxes that may apply to your gold transactions during the process.
Your selling strategies
While gold is generally considered a liquid asset, the ease of selling 1-ounce gold bars can vary depending on market conditions and demand. So, before investing in physical gold of any kind, consider the liquidity of the current gold market and have a clear strategy for selling your 1-ounce bars when the time comes.
For example, some investors prefer to sell to dealers, while others may explore online platforms or auctions instead. Understanding the selling process can help you make informed decisions and maximize the returns on the 1-ounce gold bars you invest in.
The authentication and purity of the gold
Ensuring the authenticity and purity of your gold bars is also crucial to protecting your investment — so it's important to know this information before buying any gold bars (or any physical gold at all). Reputable dealers will provide certificates of authenticity, detailing the weight, purity and origin of the gold.
So, before making a purchase, you may want to research the dealer's reputation and verify that the 1-ounce gold bars meet industry standards for purity. After all, counterfeiting is a concern in the precious metals market, so taking the time to authenticate your investment is a wise precaution.
The need for a long-term perspective
Investing in 1-ounce gold bars, like any other investment, generally requires a long-term perspective. While gold has proven to be a reliable store of value over time, its price can experience short-term fluctuations — especially in uncertain economies like the one we're experiencing now.
In turn, anyone who's interested in buying in should be prepared to hold onto their 1-ounce gold bars for an extended period, allowing the investment to potentially appreciate. When it comes to gold investing, patience is key, and panic selling during market downturns may lead to missed opportunities for long-term gains.
The bottom line
Investing in 1-ounce gold bars can be a prudent move for those who are looking to diversify their portfolios and safeguard against economic uncertainties. However, it's crucial to approach this investment with a clear understanding of the market, associated costs and the long-term commitment required. By considering these factors, it's easier to make informed decisions and navigate the world of 1-ounce gold bars with confidence.
