Why invest in Gold - Satori Traders

Why invest in Gold

Gold has a rich cultural history spanning continents and centuries. As societies have relied on the yellow metal for value and beauty, its use – and price – has continued to rise.

Gold is the metal we turn to when currencies fail and economies falter, cementing its status as insurance against tough times. As an investor, buying into Gold can be a lucrative or disappointing endeavor. It all depends on the market, your knowledge, and your expectations.

For instance, Gold made history in 2020 when it crested well above $2,000 for the first time. But in the two years since, it’s tumbled somewhat, resting around $1,650 per ounce in October 2022. 

But if you know what you’re getting into, the answer to a very simple question becomes clear: Why invest in Gold?

Table of Contents

• Investing in Gold for beginners
• Disadvantages of Investing in Gold
• Is Gold a good Investment
• Is it good to invest in Gold today

Investing in Gold for beginners

Gold is somewhat unique in that it provides multiple avenues for Investment. While each method of owning Gold bears its own advantages and disadvantages, each is well worth considering. Let’s consider now ways of investing in Gold for beginners or old pros.

One common form of Gold Investment historically is Bullion. Bullion provides a chance to get your hands on the physical Gold itself. On the other hand, it carries unique storage and insurance costs, as well as theft risks. (Plus, Gold itself doesn’t generate interest payments.)

Investing in Gold-related equities and ETFs allows you to profit not just from the metal’s appreciation, but stock volatility, too. Examples include Mining companies, refiners, jewelers, and other companies that turn Gold into product. That said, you may have to consider the ethics of the underlying company, and you won’t be able to physically handle your Investment. 

An increasingly popular method of Gold Investment is Gold IRAs. These unique instruments allow investors to weave Gold into their lifelong retirement strategy. Sure, you won’t directly hold the metal yourself. But your Portfolio will still benefit from long-term appreciation and the ability of Gold to hold its value when the market sours.

Bear in mind that most experts recommend limiting your Precious metals Investments to no more than 10% of your total Portfolio. Moderating your Investment ensures that other segments of your Portfolio have plenty of room to grow while also capitalizing on Gold’s stability.

Disadvantages of Investing in Gold

Before we look into why you should invest in Gold, we want to be clear: investing in Gold isn’t all roses. Gold, like all Investments, can carry downsides, and it’s important to tailor your Investments to your goals and tolerance for risk.

A few potential disadvantages of investing in the Precious metal include:

• Multiple pricing factors. As a finite resource, Gold’s price fluctuations are driven by powers beyond investor demand. Supply, industrial usage, geopolitics, Inflation, and interest rates can all sink or bolster Gold’s price. 
• Price swings. While the yellow metal is a relatively conservative store of value, that doesn’t preclude it from experiencing substantial price swings now and then. 

• Potentially poor returns. Some forms of Gold, particularly jewelry or lower-weight Bullion, tends to be more expensive due to sellers padding their pockets. It’s possible that you’ll barely breakeven – or even lose money – when it’s time to sell. 
• Poor income potential. While Gold can appreciate over time, the metal itself doesn’t generate interest just by existing. If you want to increase your returns, you’ll have to invest in non-physical Gold like Stocks or futures. 

• Storage concerns. Buying physical Gold presents unique storage and insurance costs, as well as theft risk. 

But where you find risks, you can also seek rewards.

Is Gold a good Investment

Here are 7 answers to the all-important question: Is Gold a good Investment?

#1: Gold Preserves Wealth Long-Term

A primary reason Gold has remained essential for so long centers around its ability to store value over time. Historically, Gold’s low melting point and non-corroding nature made it a popular metal for Coinage and, of course, jewelry.

In modern times, Gold’s ability to hold value is more immaterial – that is, related to its value in paper currency.

Consider that the Inflation-adjusted value of an ounce of Gold rose from around $371 in September 1922 to $1,660 in September 2022. At the same time, the value of the dollar dropped dramatically due to Inflation. Though these gains don’t outpace the stock market’s potential, holding some Gold can maintain or increase the value of your money by comparison.

Plus, you can always find a buyer for Gold (even if your returns aren’t as high as you’d hoped).

#2: Gold Benefits from Supply Constraints

Unlike its Silver counterpart, Gold is rarer, more difficult to mine, and enjoys fewer industrial uses (comparatively). In fact, the total amount of Gold ever discovered comes out to just 244,000 metric tons, compared to 1.74 million metric tons of Silver.

Due to this enormous supply gap, Gold tends to cling to its value more strongly than other Precious metals. And in periods where Gold mining declines, the asset’s price often soars in response to further constraints.

#3: Gold Demand Continues to Rise

Even as Gold supply constraints continue, Gold demand continues to increase.

One reason is that increasing Wealth in emerging economies, such as many in Asia, has boosted desire for – and the ability to afford – the Precious metal. That’s especially true in regions where Gold holds cultural significance.

For example, many Chinese people consider Gold a traditional form of saving, and so desire it for their Portfolios. And India’s wedding season is infamous for increasing global Gold demand as the need for jewelry arises.

But Gold’s demand extends beyond culture. Many investors consider commodities, including Gold, investable assets year-round. For others, Gold demand rises and ebbs with its price, as well as financial and geopolitical situations.

#4: Gold as a Hedge Against Inflation

Gold’s ability to maintain or increase its price over time makes the Precious metal a common hedge against Inflation. (Inflation is when the value of a dollar erodes over time due to the natural increase in prices.)

As Inflation rises, Gold typically appreciates, often buoyed by widespread investor interest in the Precious metal. The Gold spike in the 1970s represents a prime example of rising Precious metal prices – both Gold and Silver – in the midst of soaring Inflation.

The reasons for this are two-fold. The first is that when Inflation eats the dollar’s purchasing power, Gold prices tend to rise alongside the cost of living. From another angle, Gold’s status as a Wealth store may encourage people to buy Gold to protect themselves financially.

#5: Gold Can Outperform U.S. Dollar Weakness

Inflation aside, the value of the U.S. dollar can also fall relative to other currencies. When the dollar weakens, investors tend to flock to the security that Gold promises, which results in increased prices.

One example of Gold’s security in the face of a weakening U.S. dollar occurred in the early 2000s. As the dollar fell in the years ahead of the Great Recession, the price of Gold nearly tripled between 1998 and 2008.

#6: Gold Can Stand Up to Geopolitical Uncertainty

Gold doesn’t just retain its value in the face of financial uncertainty, but global and political uncertainty, too. It’s often considered the “crisis commodity” due to its history of people relying on Gold’s relative safety. When tensions arise, the Precious metal can even outperform other Investments, depending on the location and cause of the geopolitical uncertainty.

#7: Gold Provides Valuable Diversification Opportunities

Gold’s ability to diversify investor Portfolios stems partly from its countercyclical nature and status as an “alternative” commodity. Essentially, Gold tends to move opposite other Investments like Stocks and Real Estate. When these assets decline, investors use Gold to store their Wealth, and the value of Gold rises as a result. Properly diversified Portfolios that include Gold stand to reduce overall volatility and long-term risk.

You can further this diversification by looking beyond the Precious metal to its exploration and use. For instance, you might invest in mining or jewelry stocks that hold appreciation potential, or buy into diversified ETFs that pay dividends. Many such Investments offer substantial gains in addition to Gold’s natural appreciation, often leading to a higher return on Investment.

Is it good to invest in Gold today

Current economic conditions and geopolitical events are causing many investors to consider this question: “Is it good to invest in Gold today?” If you are wondering, “Why invest in Gold”, let’s recap the points we have covered in this short article.

Gold makes a valuable addition to any investor’s Portfolio, though only you can decide whether its relatively slow growth fits your long-term strategy.

Gold offers essential benefits like diversification and Wealth preservation in the face of financial adversity. And though prices can be volatile short-term, it tends to appreciate over time, providing a valuable hedge against Inflation and currency volatility. 

Ultimately, every Investment – Gold included – offers advantages and disadvantages. Gold is particularly unique due to its multiple Investment pathways, from physical metals to futures contracts to related equities.

But if you want to invest in Gold without worrying about managing every single pick, a Gold IRA might be just what you’re looking for. Not only will you have an expert watching out for your Investments, but the added tax benefits can be worth their weight in…

Well, you know.

If you want to explore Gold IRA Investments, visit our Augusta Precious Metals review. The company is committed to customer education and they have zero complaints at the Better Business Bureau or any other business rating agency. Augusta is by far the best overall Gold IRA company we have found. 

About Satori Traders

Satori Traders LLC is a California-registered Investment Advisor specializing in the Precious metals.

Bryan V Post is a California-registered Investment Advisor Representative and the founder of Satori Traders.

Bryan has worn numerous hats during his life: Engineer, Portfolio manager, Precious metals Investor, Technical analyst, Proprietary trader, Swing trader.

https://satoritraders.com/precious-metals/review/augusta/why/