Everywhere you turn these days, it seems as if someone is telling you that now is the best time to invest in gold.
Should you consider it?
Historically, gold has been considered a “safe haven” in times of economic, financial and geopolitical instability. This is certainly the case today, given the ever worsening debt crisis in Europe, the artificially low discount rate from the Feds as far as the eyes can see and unstable political environments in other parts of the world.
Inflation and currency devaluation are good reasons to invest in gold, because it holds its value: there is definitely a major potential for those conditions to develop today.
Gold’s greatest advantage is that it performs differently from other assets, which is why many recommend gold stocks as a way to diversify a portfolio of stocks, bonds and real estate. This helps protect against inflation, debt default and bad investment climates.
That said, no investment is a sure thing, and gold is no exception. Just like any asset class, its price can fluctuate widely. For example, it declined from more than $800 per ounce in the 1980s to $250 in the 1990s. Of course, since then it’s been first on a tear, reaching close to $1,800 per ounce in October of 2012, then on a major correction to around $1,350 last month (yes, that’s a 25% hair cut from the top) and stabilizing to slightly above 1,400 today.
If you’re interested in investing in gold, you can do so in a number of ways, from buying gold itself to buying stocks of gold-mining and gold-producing companies. The latter is simpler, as it allows you to obtain the potential advantages of rising gold prices without physically taking possession of gold. But buying gold stocks does require some research. You can also buy ETFs that follow the commodity or that even store gold for you in a well-known Canadian bank’s vault. In any event, discuss it with your financial professional.
Yann Kostic is a Money Manager and Financial Advisor (RIA) with Atlantis Wealth Management specializing in retirees (or soon to be), self-reliant women and Expats in Mexico. Yann works with TD Ameritrade Institutional as the custodian of client’s assets. He splits his time between Central Florida and the Central Pacific Coast of Mexico.