Gold has been on a hot streak this year. With prices reaching near-record levels in April and still holding around the $2,000 mark, investors might be wondering if now is a smart time to get in on this asset or if it’s a risky bet that could burn them down the road.
Gold has been considered a safe haven asset for centuries, and its recent popularity indicates investors’ confidence in its ongoing value. Plus, amid ongoing financial uncertainty elsewhere, a longstanding stable investment could be appealing. But how safe is it, really for investors now? That’s what we explore in this article.
Is it safe to invest in gold now?
There are several reasons why now is a great time to invest in gold. Here are three of the big ones.
Gold has been proven to offer reliable returns
Some assets are riskier than others. Stocks, for instance, have the potential for high returns, but their value can soar or plummet quickly based on everything from the latest economic policy announcement to bad PR for a particular company. While gold prices
fluctuate too, the ups and downs can be much less dramatic.
Gold has been a globally recognized currency for centuries and is a component in everything from jewelry to electronics. And given its limited supply, it can’t be devalued by overproduction the way paper currency can. Thanks to this, gold has historically provided steady, reliable returns.
In fact, gold has a negative correlation with some more volatile assets like stocks. In other words, when these riskier investment options are down, gold tends to be up. This makes it a great way to protect your portfolio from losses while still potentially enjoying the higher returns growth-focused assets may bring. Experts recommend keeping 5% to 10% of your portfolio in gold for this reason.
The economy is still uncertain
Gold prices are often inversely proportional to the health of the economy. In times of economic turmoil, gold tends to appreciate as investors seek out safer, more dependable assets.
Gold offers many perks when financial times are tough. It’s a hedge against inflation, it protects your purchasing power when the value of the dollar is down and it’s a liquid asset you can turn into cash if needed.
The past few years have seen their share of economic turmoil, from persistent interest rate hikes to bank failures. And with a potential recession on the horizon, it doesn’t seem like things will stabilize anytime soon. This makes gold a valuable asset to buy now.
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Gold is a long-term investment
Investing in gold should always be viewed from a long-term perspective. It’s not a way to gain value quickly; instead, you’ll reap the biggest benefit from holding onto it for years. Even if the price of gold dips in the short term, history has shown it’s only a matter of time before it starts going back up.
With this in mind, it can be wise to add gold to your portfolio wherever prices — and the overall state of the economy — are. As long as you hold onto it for some time, you can enjoy the full benefit of its ability to ride out economic storms and offset losses from other assets.
The bottom line
Gold’s value as a safe haven has been proven time and again, and its current popularity illustrates this. That said, it’s important to invest in gold wisely to reap its full benefits and choose your allocation based on your overall financial goals. As with any investment, be sure to carefully research your investment options and meet with a financial professional for guidance specific to your goals and preferences.
