Is Gold a Good Investment in the Post-COVID World? 

July 23, 2021

People love buying gold in the form of jewelry and other objects. However, it’s better to buy it as an investment if you want to protect your wealth.

Gold prices have consistently remained high so far in 2021. Many headlines predict that this precious metal will break new highs this year. Currently, gold is trading at more than $1,800 an ounce. In fact, there’s been a fairly big uptick for all precious metals as investors have begun to hedge against anticipated inflation.

Since the start of the year, gold prices have remained strong but mixed. For example, spot gold has steadily gained throughout the year but prices fell below $1,700 per ounce in March. However, the price of gold tends to fluctuate greatly from day to day and month to month, even though gold tends to retain its value.

Many investors use gold no matter what the economy looks like in order to hedge their portfolios against inflation and stock devaluation. While the Federal Reserve has retained low-interest rates and bought back billions of dollars in treasury bonds, the post COVID economy still remains uncertain.

According to the BEA, the inflation rate for May was 3.9% based on the personal consumption expenditure index, largely based on price increases for energy and food. Despite price increases and some warning signs, inflation hasn’t shown signs of running away. However, investing in gold can give investors peace of mind if they want to protect their wealth against a potential devaluation of the dollar or stock market dips and crashes.

Gold Investment Strategy

Depending on your investment timeline, there are two ways to prepare for a gold rally. Investing in gold requires patience. So, if you do notice a steady rise in prices, you can look for any ETF that includes gold futures. Like any other stock, you can expect to pay management fees for this type of investment.

If you plan to hold onto your gold long term, you might want to put your money behind this precious metal. You can buy gold futures based on the predictions of mining companies, or you could purchase raw gold in sizable quantities such as a 1 kilo gold bar.

Remember to find a safe place to keep gold ingots, nuggets or bars. That could mean storing it in a safe deposit box or investing in a safe for your home.

How Does a Weak Dollar Impact Gold Prices?

Typically, a weak U.S. dollar is a sign of monetary inflation. Rising inflation is not good for those who invest in stocks and bonds. However, gold prices rise with inflation, meaning that holding gold can help you increase your wealth even if the balance in your stock market accounts begins to tick downward. When people lose faith in the economy, gold prices rise, providing a safe haven for your wealth.

Many economists are predicting a weak dollar in 2021, making this a great year to shore up your portfolio with gold or gold futures embedded in ETFs.

Advantages of Investing in Gold

There are many reasons that investing in gold makes sense for individual investors, including the following:

  • Hedge against inflation: When the economy and market tank, gold tends to remain steady or increase in value.
  • Liquidity. As long as you can prove the authenticity of your gold, it’s very easy to exchange it for cash in an emergency.
  • Diversification. Even with this strong economy, it’s important to fill your portfolio with diverse investments. Include gold in your portfolio to hedge against possible losses in other areas.
  • Buy small portions at a time. you can buy small portions of gold or invest in funds that buy gold. Although it’s quite expensive, it’s rare to lose money on raw gold or its equivalents.
  • Easy liquidity: You can buy or sell your gold as needed. You could also buy gold funds that allow you to invest in precious metals without worrying about keeping it secure in your home or elsewhere.

The jury is still out to determine whether inflation will rear its ugly head in 2020. In the meantime, as the economy opens, investors are feeling more confident and putting their money behind stocks and gold bars.

Some clients invest in gold because of its intrinsic value. You can use it however you want and convert it to cash.

 

 

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