Gold is always a useful part of an investment portfolio. Although gold prices may fluctuate over the short term, gold maintains its value over the years. Gold is an excellent long term hedge against the devaluation of paper currencies and investments like stocks and bonds that are denominated in these currencies. Governments across the world are reducing the pain of the covid-19 economic crisis by printing money. The long term results will be devalued currencies and an increase in gold prices. To what extent is gold a good investment now?
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Should I Invest in Gold or Stocks?
Although the stock market took a hit at the onset of the covid-19 pandemic, the market as a whole has come back. Many tech stocks are likely to continue to do well even as the economy struggles due to the virus. Thus many investment advisors suggest that you stay in the market either with well-chosen tech stocks or an ETF that tracks the S&P 500. However, the issue of currency devaluation persists. While the valuation of your stocks in dollars may continue to climb, the purchasing power of the dollar will probably decrease over the years. Here is where gold comes to the rescue as it maintains its purchasing power over the decades.
Is It Good to Invest in Gold?
If gold is going to be your only investment vehicle, timing is very important. Too many investors get attracted to gold when the price rallies and forget about gold when the price falls. A better approach is the dollar cost averaging approach. You will accumulate more gold when prices are low and less when prices are high. Over the years your gold investments will grow and provide an excellent hedge against inflation and the periodic social, political, and economic crises that hit the world. Long term gold investors know that gold always comes back when times are tough. They take the long term approach.
Gold Investment 2020
Because of economic uncertainty, many investors are looking to gold as a refuge this year during the covid-19 pandemic. This concern has driven up the price of gold. Gold was selling for $1,400 an ounce in early December of 2019 and is selling for $1,800 in July of 2020. As the covid-19 pandemic and related economic crises are nowhere near an end, gold is likely to continue to rise over at least the next few months. Gold investment options today include ETFs that track the price of gold instead of simply buying and storing gold itself. Gold mining stocks tend to do very well at the onset of a gold rally as well.
Top Gold Stocks to Invest In
Gold investment in 2020 is not limited to buying gold bars or coins. There are gold ETFs and excellent gold stocks. Investopedia notes three top gold stocks for now. These are Barrick Gold Corp., Kinross Gold Corp., and Alacer Gold Corp. The first two are Canadian mining companies and the last operates in Turkey. Those who want to time the market may wish to invest in gold mining stocks which tend to rise faster than the price of gold going into a gold rally. However, these stocks also fall faster than gold when a rally fizzles. As such they tend to be short term options for many gold investors.
Investing Futures Gold
Commodities investors often buy and sell gold futures as they seek to profit from trends or hedge against risks. CME gold futures currently price gold at $1,856 an ounce for April of 2021. The current futures price for June 2026 is $1,938. The majority of gold futures are bought and sold by gold mining and gold processing companies in order to hedge their risks. However, speculators who successfully predict price swings are profit handsomely by trading gold futures. As you can see if you visit the CME link, there is a steady increase in the price of gold built into the futures as everyone expects a slow but steady decrease in the purchasing power of the US dollar.
Best Ways to Invest in Gold and Silver
Folks who want to hedge against inflation and the predictable steady decrease in the purchasing power of the dollar, pound, euro, yen and other currencies put part of their portfolio in gold and silver investments. The easiest and, for most, the best ways to invest in gold and silver are to buy shares of ETFs that track precious metal prices. You do need to find secure storage for gold or silver bars like you do if you buy these precious metals. We mentioned mining stocks which can be part of your portfolio but these investment vehicles need more attention and will not fit the needs of many buy and hold investors.
Forex Gold Investing
Most of the world does not use US dollars to buy gold. But many investors use the Forex system to find more lucrative investments that lie outside of their currencies. By using Forex options, a trader can move money from Yen to USD, for example, use dollars to buy stocks, bonds, or gold, and protect against currency risk as well. This can be a very profitable way of using the Forex system but takes expertise and time. The average investor will do better simply using the Forex system to protect their assets against losses in their home currency and not try to game the system.