Is Gold a Good Investment? Reasons to Buy Gold

As investors recognize the potential for ongoing volatility in a tumultuous economy, many are asking, “Is gold a good investment?”

Like any type of investment, the answer to that question will depend on your individual situation and financial goals. But make no mistake: an investment in gold and other precious metals can have several unique benefits for virtually any investor, regardless of age or investing experience.

The first step is to understand the potential advantages of buying gold, to research the different options available to you, and identify what their advantages are and how they could benefit you.

Keep reading to learn why this precious metal can make for a good investment and how to invest in gold.

Is Gold A Good Investment? 4 Reasons To Invest

If you’re asking, “Is gold a good investment,” then you’re probably wondering how gold can help you protect your current savings. World events, fluctuations in the economy, and inflation are some of the factors that may have you searching for more stable options for protecting your wealth, and gold can be a viable option. The price of gold has experienced an upward trajectory over the last decade, and many speculate that it is nowhere near its potential peak.

Additionally, keep in mind that the price of gold has historically increased in times of economic uncertainty. And with so many unanswered questions concerning the health of the economy in the U.S. and abroad, analysts see a lot of room for further growth in the years to come. With that said, gold can be a great way to protect your savings.

Here are some reasons why you should buy gold:

Reasons to Invest in Gold

1. Protects current savings

Is gold a good investment for the long-term protection of your savings? Just ask the millions of Americans who are using precious metals as a shield against volatility.

When the economy tanked at the height of the Great Recession, many Americans watched their retirement accounts plummet. Traditional assets can take a big hit when the market drops. But by diversifying your investments with gold, you can be better prepared in the event of future turmoil.

2. Hedge against inflation

Another vital factor that influences the wealth of every American is the value of the U.S. dollar. As the dollar declines, Americans simply don’t get as much for their money.

However, precious metals tend to hold value above inflation. One reason for this is that you can’t simply print more gold like you can with paper currency. It’s a finite resource. This is why gold is seen as a hedge against inflation, enabling investors to preserve their wealth and protect their lifestyle for the future.

3. Safe haven asset

Gold’s reputation as a safe haven asset stems from its ability to keep its value even in the face of unpredictable economic changes. When traditional financial markets experience fluctuations, investors often seek refuge in gold. Unlike currencies that can fluctuate in value, gold tends to stay strong. During economic downturns, the demand for gold increases, driving up its value even more.

Gold as an investment is seen as a safe haven because there's only so much of it and it is universally accepted. Unlike regular money that can be printed endlessly, there's a limited supply of gold. This makes gold valuable and a good option for keeping your wealth safe, especially when paper money loses value during tough economic times. So, many individuals consider gold a protective asset that can keep their money safe when other types of assets might not perform well.

4. Diversification of retirement savings

Gold as an investment offers a special way to be intentional about your savings, especially for retirement. Most retirement savings focus on other types of assets. But, if you include gold using a precious metals IRA like a Gold Roth IRA or Gold IRA, it can add more variety and diversify your savings. Buying gold with a 401(k) is another option you can explore, where you can transfer your 401(k) funds to a precious metals IRA to purchase gold.

In retirement savings, diversification can help spread risk across different types of investments. In doing so, you make sure that if one type of asset doesn’t perform well, it doesn’t impact your overall savings. Gold can be a great diversification tool due to its history of maintaining its value, limited supply, and ability to hedge against inflation.

Putting gold in a precious metals IRA allows you to connect your retirement savings to a physical asset that has remained strong, even when the economy is uncertain. This way, your retirement savings can be more balanced, which might help during market downturns.

What Factors Influence Gold Prices?

When purchasing gold for your retirement strategy, it’s important to understand the factors that influence its price, as with any asset. These include:

Factors Influencing Gold Prices

  • Supply and demand: Gold prices are significantly influenced by the principles of supply and demand. If mining production increases, leading to more gold on the market, prices may decrease. On the other hand, heightened demand tends to drive prices up due to a decreasing supply as gold is bought up. At the same time, central banks’ decisions regarding their gold reserves can impact the overall supply available on the market.
  • Interest rates: When interest rates are high, other interest-bearing assets become more attractive. Gold doesn’t provide interest or dividends, which may cause it to see reduced demand that leads to lower prices. Conversely, in a low-interest rate environment, demand tends to increase, pushing prices higher.
  • Inflation: Gold is often considered a hedge against inflation. When inflation rises, the purchasing power of money declines. Individuals may turn to gold as a store of value during these times, causing increased demand and higher prices.
  • Global economic and geopolitical events: Economic and geopolitical events on a global scale can impact gold prices. Uncertainty or turmoil in financial markets may cause individuals to seek the safety of gold as a haven asset. Events like economic recessions or political conflicts can lead to increased demand for gold, causing prices to rise.
  • Bull and bear markets: In bull markets, where the overall economic outlook is positive, individuals may be more inclined to favor riskier assets, lowering demand for gold. Conversely, during bear markets or economic downturns, people may want the stability offered by gold, increasing its demand and driving prices higher.

What Are the Potential Risks of Investing in Gold?

Investing in gold is not without its risks. One notable factor is the potential for price volatility during periods of political or economic unrest. In times of crisis, individuals may flock to gold as a safe haven, causing its prices to surge.

Conversely, during more stable periods, prices may experience fluctuations. Another consideration is the associated storage and maintenance fees. When opting to store physical gold items like coins, bars, or rounds with a Gold IRA custodian and depository, individuals typically incur fees for the secure storage and management of their precious metals. These factors should be weighed against the benefits of gold investments when making decisions.

How Can You Invest in Gold?

Purchasing gold offers a range of strategies to diversify your retirement savings and secure wealth. Overall, the two options for purchasing gold are either with an IRA or cash. Through an IRA, only eligible gold can be bought, whereas any type of gold can be bought with cash. Here’s how to invest in gold:

Precious Metals IRAs

A precious metals IRA is a specialized retirement account that lets you invest in precious metals like gold, silver, platinum, and palladium. These IRAs allow individuals to diversify their savings and act as a risk mitigation strategy amid market fluctuations.

Precious metals IRAs serve as a hedge against inflation when traditional money faces devaluation. Additionally, these accounts come with tax advantages. Similar to conventional IRAs, a Traditional precious metals IRA offers tax-deferred growth on investments, meaning taxes on gains are deferred until you make withdrawals in retirement.

If you’re looking to safeguard your wealth through a gold investment, you can open a precious metals IRA with Birch Gold Group. Simply fund the account, choose your metals, and make your purchase. Then, your precious metals are stored safely at an approved depository. When purchasing precious metals within an IRA, you have the option between various forms, such as bars, coins, and rounds. Your Birch Gold specialist will work with you throughout the process to ensure a smooth transaction.

Cash

Along with purchasing gold through a precious metals IRA, you can purchase gold with cash for physical possession. When making a cash purchase for gold, you can gain immediate possession of this physical asset and buy any type of gold, offering flexibility in its use or sale, as well as how it’s stored and managed.

What Are the Types of Gold You Can Invest In?

Now that you understand your options for investing in gold, whether through a precious metals IRA or cash, what types of gold can you purchase? Gold can take several forms, and the type of gold you purchase depends on how you purchase your gold. For example, to purchase gold for a precious metals IRA, it must meet the IRS eligibility requirements of having a .995 minimum fineness, except for the American Eagle. However, when purchasing gold outside of an IRA with cash, you don’t need to adhere to the IRS’s eligibility requirements. Below are some of the types of gold you can invest in, including gold bars, bullion coins, rounds, and proof and numismatic coins.

Gold Bars, Bullion Coins, and Rounds

As stated, one option for investing in gold through an IRA is purchasing gold bars, bullion coins, and rounds, which can be done through an IRA or with cash. Within an IRA, these forms of gold must meet the eligibility requirements set by the IRS. Eligible gold must have a .995 minimum fineness, except for the American Eagle. The other option is to purchase gold with after-tax funds for physical possession.

There are no restrictions outside of an IRA, which means you can purchase any form of gold at different purities. Additionally, one notable type of metal that is only available outside of an IRA is numismatic coins, which we explore in more detail in the following section.

For those looking to purchase gold within a precious metals IRA, a Birch Gold Group Specialist can walk you through your options. Below is a closer look at the different forms of gold you can purchase within an IRA or with after-tax funds:

  • Bars: Gold bars are rectangular-shaped and come in various sizes, with the larger bars typically carrying lower premiums. The most common weights range from 1 gram to 1 kilogram. Bars from reputable mints and refineries are usually stamped with information like weight, purity, and the refinery’s logo.
  • Bullion coins: Bullion coins are valued based on their gold content rather than their rarity or numismatic value — how much you get when you sell it. Investing in bullion coins provides a straightforward and more direct way to understand the metals’ market value. Bullion coins are issued by governments and mints, often featuring iconic designs and symbols, and can be bought with cash or through your IRA if they meet the eligibility requirements.
  • Rounds: Gold rounds are similar to gold coins in appearance, but unlike coins, they’re not considered legal tender. Rounds are produced by private refineries and come in various sizes and designs. They’re valued for their gold content and can carry lower premiums compared to government-issued coins.

Proof and Fixed-Mintage Coins

Along with gold bullion coins, you can purchase proof gold coins for physical possession or to place into a precious metals IRA. Proof coins are similar to bullion coins in that they are legal tender, meaning they meet the weight and purity requirements set by the coin’s issuing government. Proof coins also tend to display the same design as their bullion counterparts. However, proof coins differ from bullion coins in the minting process. Proof coins are struck multiple times with special dyes to create a mirror-like finish with sharper details. This presentation makes proof coins known for their high quality and limited production, impacting their profit potential. A popular gold proof coin is the American Gold Eagle proof.

Fixed-mintage coins are another type of precious metal you can invest in. They refer to coins in which the originating mint has capped their production or mintage. The production or minting cap can apply to the coin itself, such as a limited edition coin, or it can be for the year of production. Either the originating Mint or the party responsible for procuring its mintage when commissioned set the amount of the cap. Fixed-mintage coins vary in quantity and can range from one unit to hundreds of thousands, or even millions, of units.

Numismatic Coins

Numismatic coins derive their value from the worth of the metal and their rarity, historical significance, and condition. These coins aren’t valued solely based on their gold content. Instead, they’re often produced in limited quantities, making them even rarer and desirable among collectors. The limited mintage can result from historical circumstances, intentional scarcity, or unique minting errors.

The preservation and condition of numismatic coins are also important. Coins in mint or near-mint condition often fetch higher prices in the market. However, it’s important to note that numismatic coins are not eligible to be placed in a precious metals IRA.

While these coins can be fascinating and potentially valuable additions to a collection, individuals should understand that their market values can be more subjective than those of bullion coins and other forms of physical gold.

Read our guide to investing in gold to learn more.

Key Takeaways: Is Gold a Good Investment?

If you want to learn more about how gold or other precious metals could benefit your financial goals, such as learning more about a gold vs silver IRA, talk to the pros at Birch Gold Group today.

Birch Gold Group is an established precious metals company rated A+ by the Better Business Bureau. Our mission is to aid our customers in protecting their lifestyle in the face of current and coming economic instabilities. In doing so, we offer investors a wide variety of options, including precious metals IRAs, where you can purchase eligible gold, silver, platinum, and palladium.

Is gold a good investment for you? Call (800) 355-2116 to speak to our gold specialists now, or fill out the form on this page for more information.

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