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4 times gold can help your portfolio most

Gold can act as a store of value through periods of uncertainty and volatility in other markets. Getty Images

Following months of growing concern about a recession, combined with rising interest rates, inflation and other economic uncertainty, it's no surprise many investors are turning to gold. The precious metal has been a store of value for centuries, and this year has already seen an increase in value.

But if you're thinking about investing in gold, it can help to consider its long-term value for your portfolio. Whether you decide to invest in physical gold bullion, gold ETF shares or a retirement-focused gold IRA, gold is a secure investment type that you can benefit from over time.

Like any asset, there are periods when your gold investment can boost your portfolio more than others. Below, we'll go over a few times when you may get the most from investing in gold. Explore your options for gold investing here with a free information kit.

4 times gold can help your portfolio most

Market ebbs and flows mean that your gold investment can help you out more at different points throughout your investment timeline than others. Here are some times it can help the most:

When the U.S. dollar value is down

Gold, historically, is viewed as a good hedge against inflation. When the value of the U.S. dollar goes down as inflation dampens its purchasing power, gold's value often rises.

A prime example is the inflation during the 1970s. Over the decade, the inflation rate averaged nearly 7%. Meanwhile, gold prices increased from around $35 per ounce at the start of the decade to over $600 by early 1980 according to data from the World Gold Council — far outpacing inflation over that time. Even today, gold prices have risen over the past year. Though these steep climbs don't last forever, having a portion of your portfolio in gold during inflationary periods can pay off over time.

Learn more about how you can benefit from a gold investment today with a free investors kit.

During a recession

When the economy is weak, gold tends to increase in value; after all, it's viewed as a safe haven. When investors want to add security, they often buy into gold, increasing its demand and price.

"A rise in the price of gold may be a signal that the economy is struggling," reads a report from the Bureau of Labor Statistics published following the Great Recession. "As a result, in times of either a crisis or inflation, many investors turn to gold to protect their principal. By contrast, in times of economic stability, investors are more likely to turn to more speculative investments, such as stocks, bonds and real estate. During these times, the price for gold often declines."

Investing in gold ahead of a recession can help your portfolio by keeping your overall investments relatively stable. Even if you lose money elsewhere, you may be able to weather the overall economic downturn with a portion allocated to gold.

When your other investments are volatile

Gold also makes a good diversifier against downturn in other markets. Though it may not directly rise when the stock market or real estate market is down, it also doesn't tend to move down alongside them, either.

Gold often moves independently of other markets, which is why it's seen as a good way to diversify. Take, for example, the 2022 market. While the S&P 500 ended the year down by over 19%, gold's price remained stable over the year, ending at a similar price point as it started.

You may not always see the large gains other markets take on during upswings, but using gold as a diversifier can help you keep some stability through changing economic environments. 

When you have a long investment timeline

Thanks to all the factors above, gold may be ideal when you have a long investment horizon ahead of you. 

Over the next few decades, the economy could see any number of periods of inflation, recession and uncertainty — so you can benefit from gold each time. And with a long period of time to invest, you can afford to take on a bit more risk, anyway.

Experts generally recommend investing only around 5% to 10% in gold. Traditional stock and bond investing, alongside other assets, are still important sources of growth. A small allocation to a stable asset like gold paired with other assets that can help you build wealth over the long term can be a good combination for a well-diversified portfolio.

Start learning more about how to add gold to your portfolio with a free investment guide today.

The bottom line

If you're considering adding gold to your portfolio, understanding just how the asset's value tends to change over time and its benefits as a diversifier can help you make the most of your investment. Periods of recession, inflation and overall market volatility are when gold may make the biggest difference. Plus, if you have a long investment timeline, you can expect to experience a number of these periods in the decades ahead. 

If you're still unsure, consider speaking with a financial advisor about whether gold is right for you and how much to invest. And to learn more about how to invest in gold, start with a free information kit today.

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