Are you planning to invest in gold but need some convincing? If your answer is yes, then you should read further.
Gold is highly prized for its immense beauty. It is durable, ductile, malleable, and reflective. In addition, gold has high corrosion resistance and is a good electric conductor. There are three types of gold in the modern jewelry market, this includes yellow gold (the purest form), rose gold, and white gold.
The value of gold never fades and continues to increase with time, which makes it a very good investment. Gold is a great tangible asset that remains regardless of political, economic, and business conditions. This is why it is considered one of the most stable assets you can invest in. Below are some of the reasons you should still consider investing in gold—even in 2021:
- Gold Stabilizes And Diversifies Your Retirement Portfolio
Investing in gold can help stabilize and diversify your retirement portfolio. One of the best ways to invest in physical gold without worrying about secure management and storage is through a gold individual retirement account (IRA). The three types of IRA include traditional IRA, Roth gold IRA, and Simplified Employee Pension (SEP) IRA.
In a traditional gold IRA, you can enjoy a tax-deferred savings account that works like your existing IRA, in which your contributions, gains, and investments aren’t taxable. The Internal Revenue Service (IRS) sets a contribution limit of US$6,500 annually if you’re above 50 and US$5,500 if you’re under 50. A pre-tax IRA involves paying distribution taxes during retirement.
Roth gold IRA is an after-tax retirement investment option that works like your existing Roth IRA account. You don’t have to pay taxes during your retirement in Roth IRA because the tax deductions apply now. On the other hand, the SEP gold IRA is for business owners and self-employed workers that works like a traditional pre-tax IRA with greater contribution limits.
Here’s how gold IRA can help stabilize and diversify your retirement portfolio:
- Provides Tax Advantages: A gold IRA involves investing in precious metals in your retirement account. Because gold IRA is a retirement account, you can invest your money and enjoy certain tax advantages. You don’t have to worry about any tax implications when you roll over a part of your existing IRA into a gold IRA.
- Constant Monitoring And Reporting: A gold IRA provides online balance reports and quarterly statements, giving you more fund control to gold coins, bullions, and precious metals like silver, platinum, and palladium.
- Gold Value Increases: A gold IRA diversifies your retirement funds because the price of gold moves differently from bonds, stocks, and other paper assets. While stocks and mutual funds decrease in value during economic downturns, the price of gold is not usually affected. So, it means that your gold can compensate for any decline when your other investments sustain a loss.
- Gold Is A Valuable Trading Commodity
Aside from the precious metals and jewelry industry, gold is also valuable in the electronics industry. And one of the easiest ways to gain gold exposure is via the stock market, in which investors can invest in the shares of mining companies or actual gold bullions. When the price of gold increases, mining companies gain higher profit margins and so as your profits, boosting earnings exponentially.
Check the following tips when investing in gold as a commodity:
- Choose Low-Cost Producers: One of the key considerations when it comes to commodity-based business investment is to choose low-cost producers. In this way, you can get the most of your investment without capitalizing that much money. It’s also good to consider inflation-proof securities.
- Consider Important Factors: You also need to consider the other issues that gold-mining stocks face, such as difficulty maintaining good production levels due to political risks.
- Trading Documentation: When trading commodities, it’s crucial to invest with ease and be aware of mitigating the risks. You have to make sure that documents support the trade commodities, disclosing all the information and instructions, including the terms and conditions.
- Gold Can Help Manage Business And Other Investment Risks
If you’re into other businesses, gold can help manage general risks. Typically, the price of gold increases with time and liquidating gold when you need cash is easy. You can sell gold fast in the market because it’s in demand. For instance, a small business owner can sell gold jewelry pieces to the jewelry shop or pawnshop to obtain cash and fund emergencies and other financial plans.
Hence, gold can help manage your other investments’ risks, reducing inflation fears. So, it’s a good idea to invest in gold stocks and physical gold. Check the following ways gold can help in managing business risks:
- Gold Provides Security of Value: The price of gold usually goes up, providing security of value, which can offset any losses that your other investments might face. While the price of gold can go down, it’s only temporary and it goes up again. So, if you have gold jewelry from 10 years ago, its current value is still higher than before. Just imagine the value that gold bullions and other gold assets can offer.
- Offers Inflation Risk Protection: Inflation is the buying power of money, which is one of the common enemies of a savvy investor. Cash value depletes and depreciates as inflation increases. So, your US$500 now can buy you fewer items today than it could around three to five years ago. Therefore, you need to safeguard your business and other investments with a stable asset, which includes gold.
- Keeps Your Investment Portfolio Stable: Your purchasing power also decreases with inflation. Investing in gold this year can prepare you for worst-case scenarios in the next few years while COVID-19 is still threatening consumers and economies. It’s not good to put too much faith in your cash savings if you want to have a stable investment portfolio.
- Great Way To Save Money: If you’re planning to expand your investments in the future, you can maximize your potential by having a sufficient amount of capital to realize your goals. Instead of saving cash, investing in gold can provide you more buying power in the future.
- Gold Prices Could Double
Historically, gold is always on the top rank of appreciating assets. Physical gold is always available because it never spoils. That’s why many investors include gold investments in their portfolio.
According to a fund manager, gold prices could double from about US$3,000 to US$5,000 an ounce in three to five years. Gold reached an all-time high of US$2,075.47 in August 2020 when the COVID-19 pandemic significantly affected the global economy.
When the prices of gold and other precious metals increase with time, it means that you can vouch for its accelerating value to provide you more money in the future. As already mentioned, your buying power increases as the inflation rate increases, which is unlikely with cash savings.
- International Banks Also Invest In Gold
Gold investments lend a great degree of financial stability. Even the world’s largest global banks purchase gold to be held as a valuable asset. They do this as part of their efforts to achieve institutional financial stability.
If you think about it, these banks consider gold as an insurance policy or hedge against unpredictable economic shifts. So, when banks invest in gold, why shouldn’t you do the same? The mere fact that banks with tons of cash invest in gold, the more reasons you should do so!
In central banks, one of the primary roles of gold is to diversify reserves. While central banks manage nations’ currencies, they’re subjected to value swings depending on the economy. Central banks print more money but tend to devalue the currency. On the other hand, gold is a physical commodity, a natural hedge that banks can rely on against inflation.
Because gold doesn’t carry counterpart risks or credit, this metal serves as a country’s source of trust in any economic environment. Hence, it’s crucial for banks to have gold reserve assets, alongside government bonds.
- Take Pride In Owning A Tangible Asset
Why do you need to own a tangible asset? While stocks, bonds, and other similar investments just exist on paper, gold and other precious metals have a tangible counterpart in the form of coins, bars, and bullions.
Because gold is a tangible asset, you can pass it down to your children. You can take control over the storage facility or assign custodians to manage your gold investment in a more secure storage.
In addition, investing in gold is more private than other investments because of offshore checking that provides privacy. Since only a few individuals and institutions can access gold ownership data, you have peace of mind that your investment is secured.
With gold and other precious metals as a part of your investment, they provide an added layer of protection and diversification to your retirement plan. You can manage the risks associated with your business and other types of investments with gold—including other precious metals like silver and palladium. Generally, gold investments are stable, and they generate consistent returns that can protect your wealth and your future.