Gold has always been something that humans have seen as both, an investment and a source of value. It’s important to double-check your goals and long-term investment strategy, and make sure it fits appropriately into your portfolio. Like any investment, there is always the risk of loss, so make sure you have all the facts. Here are some things to consider if you think you are ready to invest in gold.
Why is gold rallying?
Gold is typically seen as a “safe haven” asset in times of uncertainty because it is less volatile than other investments. Additionally, gold moves inversely to the U.S. dollar, meaning that when the dollar moves lower, as it has done lately, gold moves higher.
As the pandemic shook up markets in late-March, gold suffered a sell-off as investors rushed to free up cash. However, since then, buyers have returned to gold.
Is now the right time to buy?
For a smart investor, the question should not be “when to buy” but “how much?” There is never a bad time to buy gold and every good investor should have gold as an insurance in their portfolio. Financial advisors typically recommend a gold allocation of 1%-5% of an overall portfolio. However, the gold allocation could shift higher from 5% to maximum 15%.
How To Invest?
Although gold is one of the world’s oldest commodities, there are now multiple ways to invest in gold. Each investment strategy comes with pros and cons, so it’s incredibly important to decide first why you are wanting to add gold to your portfolio so you can be sure you are investing in the right type of gold.
As you should hold gold as an insurance for worst case scenarios, there is only one save way to own gold: Physical Gold!
Physical gold bars and coins are the most traditional way to own gold. Physical gold assets can now be purchased at banks, among a lot of other places. Buy physical gold, such as coins and bullion, and store it in your own safe place. You can manage the storage yourself by buying a strong, reliable safe for your gold. If you can’t store it on your own premises, use a different safe place. Do not store gold in a deposit box at a local bank or other financial institution. In the worst case scenario, especially in a financial crisis, the bank might not open its doors and you won’t have access to your physical gold.
The only alternative I would consider are gold-backed cryptocurrencies. These are typically for more experienced investors, so proceed with caution.
Sven Franssen