6 Concrete Reasons Why Smart Investors Own Gold (2024)

FAQs

6 Concrete Reasons Why Smart Investors Own Gold? ›

Gold investment has several potential benefits, such as its capacity to hedge against inflation, liquidity and portfolio enhancement. But there are downsides, including volatility, lack of income generation and storage expenses for physical gold.

Gold investment has several potential benefits, such as its capacity to hedge against inflation, liquidity and portfolio enhancement. But there are downsides, including volatility, lack of income generation and storage expenses for physical gold.

Cons of Investing in Gold

There is no stream of income associated with the investment. Other investments provide income in addition to gains from price appreciation. For example, stocks can earn dividends, bonds can earn interest and investment real estate can earn rent. Extra costs.

Buy gold before prices rise

While the indicators above are mixed, the bottom line may be that now—April 2024—is the time to buy gold. Multiple industry experts say gold could have a record year, so you'll want to purchase your precious metals before prices soar.

Gold is often considered a good investment for diversification, as it may be less correlated with other assets such as stocks or bonds.

I'd stop investing in gold and silver completely. I don't put money in precious metals at all, because they have a lousy long-term track record. — Dave Ramsey is CEO of Ramsey Solutions. He has authored seven best-selling books, including The Total Money Makeover.

Throughout history, gold has been seen as a special and valuable commodity. Today, owning gold can act as a hedge against inflation and deflation alike, as well as a good portfolio diversifier. As a global store of value, gold can also provide financial cover during geopolitical and macroeconomic uncertainty.

For short-term needs, cash is better due to its unmatched liquidity. For long-term buy-and-hold investments, gold is preferable to protect against inflation and provide portfolio diversification. The ideal solution is to hold both but allocate based on your specific needs and risk tolerance.

However, it's important to note that while 1-ounce gold bars can be a valuable addition to a well-diversified portfolio, it should not be the sole investment strategy for any investor. After all, gold does not generate dividends like some other assets do, and its value is primarily driven by supply and demand dynamics.

Where will gold be in 5 years? ›

Considering gold's historical annual growth rate of 11.2%, an ounce of gold could potentially be worth about $3,441 in five years from its 2023 value of $2,024 per ounce. This estimation assumes that gold continues to grow at its average historical rate.

Based on conversations with several gold investing experts, the price of gold could continue to climb to $3,000 or higher over the next few years, but it's hard to say exactly what the path forward will look like.

The bottom line. There's no way to know exactly how much an ounce of gold might cost 10 years from now. However, most experts predict that the price of the precious metal will be significantly higher in 2034 than it is today.

If you want an investment that provides an income stream, stocks are likely the better choice. Note: You might be able to earn dividends from gold stocks or gold ETFs, but these are riskier than investing in physical gold like bars and coins.

The truth is gold and other precious metals are highly volatile and past performance is not a good predictor of future returns. If sales pitches also include a lot of doom-and-gloom or high-pressure sales tactics, they could be setting you up for fraud.

Gold in Rich Investors' Portfolios

It turns out the average ultra-high net worth individual (UHNWI) with a net worth over $30 million does own a little gold. They just don't own giant vaults and swim in gold like Scrooge McDuck. The average UHNWI holds about 2% of their net worth in gold.

So, what's behind the recent gold rush? Gold buyer Tony Davis of Atlanta Gold & Coin Buyers says inflation, political uncertainty and international conflict can all drive up the price. "Any time you have concern, uncertainty, there seems to be a rush into precious metals such as gold and silver," Davis said.

Gold is a major financial asset for countries and central banks. It is also used by the banks as a way to hedge against loans made to their government and as an indicator of economic health. Some also see gold as a potential investment vehicle that can help diversify their portfolio.

They just want to sell. For some, sky-high values simply mean it's a good time to cash in; It's hard to ignore record prices that climbed above $2,400 an ounce last week. For others, it's a more desperate move to get money for bills and rent.

The reasons behind gold's enduring value include: Gold is perceived as a symbol of wealth, power, and majesty. Gold has had an exalted position throughout the ages as a highly coveted, even worshipped material. Gold has been used over millennia as jewelry and a means of exchange.