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Should You Invest in Gold (Things to Consider)

Gold has been around forever. It has always been considered valuable, and it was one of the earliest forms of money. Even today, even that gold can be used in technology, it is considered an investment. In this post we are going through things you should consider if you wish to invest in gold.

Is gold a good investment?

Gold can be a good investment as one part of your portfolio. It can be used as a diversification tool along with stocks, real estate, other commodities and in some cases cryptocurrencies. Gold has not brought huge returns in the longer term like stocks have, but it has kept its value safe from inflation. Even if gold seems expensive on a normal chart, when looking at an inflation-adjusted chart, it has kept its value.

How to invest in gold?

There are several ways to invest in gold. I will go through my top two choices.

Gold ETFs

The first one is investing in gold ETFs. This is an easy way you can invest in gold from home, without much work. There are a lot of different ETFs that have just gold or that have gold and other commodities. The choice is up to you, if you wish to buy an ETF with gold alone or an ETF with gold and other commodities as well. Commodity ETFs can have oil, natural gas, copper, silver, grain, soybeans, etc.

Physical gold

Another option to buy gold is to buy physical gold. You usually have to pay a premium over the price of the spot price of gold. Meaning, if you bought a coin that had 100 dollars worth of gold, you would probably have to pay around 120 dollars for it.

If you buy larger amounts of gold at once, like one kilo, the premium percentage will usually get smaller. Later, if you want to sell that gold coin you bought for 100 dollars, you probably will get some of the premium back, meaning you will be paid the 100 dollars and some on top of it. If the gold price has not moved at all.

I personally have two gold coins myself. I can tell you, the first time I got my hands on one, it was fascinating. It is also a way for me to keep my portfolio more diversified, but also it is a nice change, to have some physical investments as well. Stock ownership documents are nowadays mostly online, and not in paper form as they once used to be.

gold bars

Should you invest in gold?

The question of whether you should invest in gold depends on your personal preferences. It can be a good way to diversify your portfolio and protect yourself against inflation. The big investors have differing opinions about gold. Some see it as an essential part of a portfolio, where others say it is worthless since it doesn’t pay dividends and its price is formed purely on supply and demand.

Candlesticks represent SP500 index, orange line represents gold price since 1995 until 2022 January. Screenshot from tradingview.com

Gold prices have had conflicting correlations with stock prices. Sometimes if the stock markets face a bad season, gold can rise. On the other hand, sometimes when stocks fall, gold falls along with them. I would consider this as one reason gold is a good diversification to an otherwise stock-heavy portfolio, but again, this is just my opinion.

At last, the decision if you should invest in gold or not, is in your hands. Even that gold has offered some protection against inflation, there is no guarantee this will continue in the future.

Other things to consider when investing in gold

When looking at the price chart of gold or pretty much anything, always remember to also check out the inflation-adjusted return. It can tell a whole other story.

If you decide to buy physical gold, please do your research well so you are buying from a legitimate seller. You don’t want to get scammed or sold some gold-copper mix which was sold as 99.99% pure gold.

Other investing-related posts can be found here.

This is not investment or financial advice. Past returns are not guarantee of future returns. Always do your research before risking your hard-earned money.