Wealth Management

Investing in Gold: Is it Worth It?

4 mins
Jon Green
November 15, 2023

Investing in gold is often a strategy for specific economic periods. But as an expensive asset, there are pros and cons to adding it to your portfolio.

Over the last few years, a volatile economy compounded by inflation and rising interest rates has caused a significant shift in preferred investing assets. 

Variable investments like stocks and index funds are less popular than in previous years. Meanwhile, high-interest rates and a booming housing market have propelled CDs, bonds, and real estate to the top of investors’ minds. 

There’s also much curiosity about commodities—gold in particular.

As a traditionally “stable” asset, gold is often considered during economic and political turmoil. But is it really worth it?

Let’s take a look at who is investing in gold today, the reasons not to purchase this asset and its alternatives. 

Who is investing in gold?

According to the August 7th article from Investing News, Millennials are outpacing baby boomers when it comes to purchasing gold. But many American investors, regardless of age, are looking favorably at the yellow metal. A Gallup study found that the number of people viewing gold investments positively nearly doubled between 2022 and 2023.

The disadvantages of investing in gold

Historically, gold has been a safeguard against inflation and market uncertainty. It is also an asset with a high value globally, making it a desirable and versatile asset.

However, gold is hardly an ideal investment. Like any other asset, it has its own set of disadvantages.

For one, gold is incapable of providing income. Bonds, stocks, and other assets generate income, either through interest or dividends, for the investor. This is not the case with gold. It does not accumulate additional value. Price increases for selling gold relate more to inflation and demand. 

Gold is also more limited than other metals, such as silver, which have a number of industrial uses. 

In addition, gold is a physical asset. It must be stored and safeguarded. 

Another issue is fraud. The Commodity Futures Trading Commission (CFTC) warns against unsolicited calls, offers made through media, claims of big returns, or that gold purchased will be stored for you. 

The journey (and problem) of selling gold

One often underestimated disadvantage of gold as an asset is how complicated it can be to buy and sell.

Consider this lifecycle of a piece of gold, from your purchase to selling it off:

  1. You need to determine a reputable seller of gold.
  2. Then, you must have it appraised to ensure the seller’s description of the gold is accurate.
  3. You must find a place to store the gold and ensure it is safeguarded.
  4. When you are ready to sell your gold, you must find a buyer, which can require speaking with multiple parties, posting online, and potentially running ads.
  5. You must then have the gold re-appraised to show the buyer the gold is legitimate.

In addition, gold can be difficult to sell when the value of it drops in the market. You may need to wait until its price rises again to find buyers. 

You can understand that investing in gold requires considerable time and effort to buy, maintain, and sell. For that reason, many investors find that gold is not a worthwhile investment.

When can it be advantageous to buy gold?

Despite the drawbacks, there are several reasons that individuals choose to put their money in gold. Portfolio diversification and the fairly stable value of gold are the top two justifications

Gold may be useful for investors during times of political or economic uncertainty. Periods leading up to a recession or high inflation could be a signal to buy gold. The World Gold Council suggests that assets like gold may perform better when inflation rates exceed interest rates. In other words, it may also be used as a type of emergency fund—although it is not nearly as liquid as other options.

This type of commodity is also typically seen as a long-term asset. Therefore, it may make more sense for younger investors looking to retire 30 or 40 years from now. 

Alternatives to gold

Before making any decision regarding an asset, it’s good to review potential alternatives. Some common options include:

Of course, what asset makes the most sense for you largely depends on your portfolio and goals. It’s important to consult with family members, advisors, and trusted friends before making significant investment decisions. 

Want a second opinion?

Want some feedback
on your retirement plan? We can help.

With over 40+ years of experience in the financial sector, and as a licensed fiduciary, founder Jon Green can help you look over your retirement plan and understand whether you are on track.

You can book a complimentary session
or call me at +1 (828) 884-8840.

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