Why Gold Should Be in Your Retirement Investment Strategy

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Gold coins sitting on top of gold bars

Physical gold can be found in various forms, from coins to gold bars, giving investors various investment opportunities to choose from. Photo by Zlaťáky.cz on Unsplash

 

Precious metals have long since served as popular vehicles to help investors achieve various financial goals. However, commodities such as silver, platinum, and gold may also deserve a spot in your retirement portfolio. While the road to retirement looks different for everyone, saving for retirement by investing in gold and other precious metals could help safeguard your portfolio.

Here’s how investing in precious metals could be more beneficial than traditional accounts when planning for retirement.

Safe-Haven Asset

While every investment involves some risk, investing in precious metals, such as gold investing, can help investors create a portfolio that minimizes this risk during periods of market volatility. Precious metals are considered “safe-haven assets,” meaning these financial assets are not only designed to retain but also increase in value during an economic downswing.

For example, during the 2008 financial crisis, many investors sought security to balance the market turmoil. Between 2008 and 2009, the price of gold rose 12.8%. Historically, precious metals can have unique benefits that are particularly useful to investors planning for retirement. 

Hedge Against Inflation 

Americans have felt the pressure of inflation in recent months, making it more important than ever to protect your portfolio from the negative effects of skyrocketing costs. Precious metals like gold and silver can be a reliable investment option as metals have historically maintained their value as inflation rises. 

Investing in gold for retirement is particularly attractive as this precious metal has proved its value in real-time. As inflation surges, many stock values begin to fall. In April of 2024, the price of gold reached a record high of $2,259.29 per ounce. Investing in gold and other precious metals can be an attractive option when seeking long-term investment options to preserve wealth.

Portfolio Diversification 

A diversified portfolio is essential to any solid retirement plan. Traditional retirement accounts are typically invested in securities like stocks, bonds, and mutual funds. The value of precious metals is independent of any other investment and may not move in tandem with the stock market. Investing in precious metals can help protect your portfolio during economic uncertainty and be a reliable tool in your retirement portfolio. 

The price of precious metals can vary, making some choices more attractive than others when it comes to diversification. For example, based on supply, demand, or current happenings in the manufacturing industry, investing in gold for retirement may reap more benefits than investing in palladium. 

 

Finite Materials 

With scarcity comes exclusivity. Precious metals are finite materials, unlike paper currency that can be printed, which ultimately decreases its value. Gold, platinum, and other precious metals are physical assets that can only be attained for purchase through an expensive and laborious mining process. It is because of this process, combined with the useful elements that these resources hold, that metals are able to retain their value over time.

Precious metals, especially gold and silver, have many uses in the manufacturing industry. From jewelry to engineering, these precious metals can be used in a variety of ways. Both of these resources have unique properties like high density, high electrical and thermal conductivity, and low reactivity. This composition trifecta makes precious metals increasingly valuable. Limited supply and increasing consumer demand allow precious metals to maintain their long-term value. 

Global Stability

Since precious metals are finite resources, their value remains independent of any country’s economic conditions. If the market takes an unexpected turn in any part of the world, the price of gold, silver, and other metals is likely to remain largely unaffected. It is difficult to predict unexpected market events, leaving investors searching for a strategy to protect, preserve, and even earn a profit during times of uncertainty. 

The global stability of precious metals has been a pinnacle of safety when it comes to retirement investing. Similarly, during the COVID-19 global pandemic, gold was one of the most well-performing assets in the world, skyrocketing by 27% by the end of Q2 in 2020. The price of precious metals during international turmoil further solidifies the value precious metals can hold in a portfolio. 

 

The Bottom Line 

While the price of some precious metals, especially gold and platinum, could be a costly initial investment, it could buy you peace of mind over the long term. Retirement investors should consider precious metals as a tool to diversify their assets and prepare for economic downturns, and there’s likely room for this type of asset in any investor’s portfolio. 

This type of investment is not intended to be a short-term cash grab. However, the safety and reduction in risk that investors can find when investing in precious metals can be worth their weight in gold. 

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