3 times gold investing makes sense (and 3 times it doesn't)
Inflation and elevated interest rates have made financial life difficult for millions of Americans this year. And with a potential government shutdown on the horizon, the forecast for immediate relief doesn't look great. In times like these, many take a closer look at their investments, both for opportunities to save and for others to grow and protect their existing earnings.
Many have turned to gold in 2023. Long considered a reliable hedge against inflation, the shiny precious metal has taken on new life this year. But, like all investments, there are times when it makes sense to get started with gold and times when it may not be worth it. To get the most out of your gold investment, then, it helps to know and understand all six times.
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3 times gold investing makes sense (and 3 times it doesn't)
Here are three times gold investing can make sense for investors:
- When inflation is high: Arguably its greatest strength, gold is long considered a smart way to hedge against inflation. When other investments falter during times of inflation, gold tends to hold steady, giving investors a rare positive in an otherwise volatile economic environment. This is why so many have turned to gold this year.
- When the economy is uneven: When the economy is shaky and the purchasing power of the dollar erodes, the price of gold tends to be stable and may even tick up a bit. Gold came close to hitting a record high this year and has stayed around that level ever since, as the forecast for greater economic growth and stability has wavered.
- When investors need to diversify their portfolio: A diversified portfolio is often key to long-term financial success. Gold can help accomplish this goal by breaking up your investments beyond just traditional stocks and bonds. Be careful, however, to not get blinded by gold's shiny benefits. Most experts recommend limiting your portfolio to just 10% (or less) in gold.
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And here are three times investors may want to look elsewhere:
- When you need an income-producing investment: Gold can be beneficial in a multitude of ways — and there are a multitude of great gold companies that can help — but it's not an income-producing investment, at least not in the short-term. While you can make money with gold over many years, it won't make you quick cash now.
- When you have a short investment horizon: Gold can be beneficial for investors of all ages, but it's often not best for those with a short investment horizon. Instead, it's usually (but not always) better for younger investors who can see a successful gold investment through over the years and potentially decades.
- When you haven't done your research: Gold can be a complex but rewarding investment. To make it the latter, however, you'll need to deal with the former. And that requires time, research and maybe even some money. For those looking to make a quick dollar or a simple fix, gold is unlikely to be the best investment.
The bottom line
Gold investing can be advantageous for millions of Americans, particularly in times like now. Before buying in, however, it's important to know when it makes sense and when it doesn't. By understanding the above six scenarios investors will better position themselves and their gold investment to shine for years to come.
