Commodities in 2023: Is Gold Still a Good Investment Opportunity?
A lot of people today are choosing to make their money stretch by investing. Your success as an investor heavily relies on the types of assets that you choose to invest in. There are a number of options at your disposal; commodities continue to be a popular asset class. A commodity which continues to hold a wide appeal is gold. However, is gold still considered a food investment? Let’s find out.
A Background on Gold
Gold, of all the precious metals, has perhaps one of the longest histories. It has always symbolized wealth and therefore been prized and coveted by the masses. It is still closely tied to several currencies. Gold today is still a great option for investors because it continues to yield results. Obviously, as with all forms of assets and investments, there will be fluctuations in the value of gold. However, even during economic hardship, the value of gold tends to hold steady and even rise, meaning that it often does better than a lot of other types of assets.
Gold as a Diversification Tool
Diversification is one of the basic principles of investing. Sinking all of your money into one asset does not make sense. Diversifying simply refers to spreading your wealth over a few different types of assets in order to strengthen your portfolio against loss. The value of gold tends to hold pretty steady, and, as mentioned above, it doesn’t tend to be affected by the stock market or economic recessions, making it a robust investment. In some places, investing in gold also comes with its own tax advantages.
Investing in Gold
If you want to start investing in gold, then there are a few different ways that you can go about this. There are gold investment funds, these are perhaps better for short-term investments, but they are more challenging. The investment funds are also usually a better option for those on a budget. Gold investment funds are usually exchange-traded funds or exchange-traded commodities. The funds purchase the gold, although you never receive it; the commodities are debt notes which are backed by gold. You can purchase them independently or via third parties like investment managers.
You could also decide to invest in gold-related or gold-adjacent businesses like mines or buy stocks in a jewelry business. Although it is worth pointing out that this option is not for the faint-hearted or risk-averse investors. In addition to the value of gold and the demand affecting the value of the shares or stocks, there are several other elements which also dictate how much your investment will be worth. You can keep a close eye on the value of gold using services like TradingView, which can outline upcoming economic events that could increase or decrease the value of gold and give you a better idea of when to hold and when to fold. To keep track of market movements, most traders utilize the economic calendar.
One of the most popular ways to invest in gold is to physically purchase it. This could mean jewelry, coins or bars. Gold jewelry is arguably the most accessible option to a lot of people; however, the actual gold content of the jewelry can waver, which, among other elements, does affect its value. Buying gold bars and coins are another choice. The coins can have a numismatic value which means that they can be worth more than their weight in gold. Bars, however, tend to simply be worth their gold content. Either way, owning the gold physically is a great way to pass on generational wealth.
Things to Bear in Mind
There are, of course, risks involved with investing in any capacity, and gold is no different. While, as mentioned above, it does tend to provide reliable results, there is always the possibility that the price will dip. Supply and demand is the foundation of all investments. If the demand dips, then the price will reflect this. Again though, diversification is what is key here; your portfolio should not be overly weighted into any one thing. You will only see your returns when you come to sell the gold, which means that your profit relies on you finding the best time to sell. Lastly, you might also need to consider the storage needs of the gold if you do choose to buy it physically.
The Bottom Line
Gold holds a lot of sentimentality across the world; in fact, this is really what drives its worth. This can make investing in gold feel risky because things could turn on a dime, but gold has been consistently sought after and prized for centuries, so it is hard to see a time where this changes. All this is simply to say that there is definitely still a place for gold in a modern investor’s portfolio. However, again, it is important to stress the importance of a diverse portfolio. While gold is a good investment, it should not be your only investment.