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The Top Reasons To Buy Gold To Make A Solid Return

The Top Reasons To Buy Gold To Make A Solid Return
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Imagine a tennis court. Now, imagine a cube with sides that are slightly shorter than the length of a tennis court. No, this isn’t some sort of New Age meditation. This is, in fact, a way to visualize all the gold that has ever been mined since the beginning of time. Most people are shocked to discover the relatively small amount of gold that exists above ground. Indeed, if all that gold was evenly divided between each person on Earth, each individual would only be entitled to a mere 23 grams. Let’s examine some of the best reasons to purchase this rare chemical element that has captivated humans for thousands of years.

The Economy Hedge

You don’t need to be a financial expert to know that we are currently at the brink of a recession that is bringing the world to its knees. The U.S. debt-ceiling debacle led to the country’s first-ever credit downgrade, while smaller countries like Greece have found their debt so unmanageable that their economy is about to enter the Death Star. Gold is known for being relatively dependable in the darkest of times, with the price of gold still up over 30% in 2011 despite the recent pullback.  The S&P 500 meanwhile, is down about 10% and the US dollar continues to be weak.

Reduce Volatility & Protect From Inflation

Financial pundits advise strengthening and stabilizing your portfolio with gold due to its ability to withstand inflation and times of uncertainty. Indeed, in the years since World War II (when inflation has affected the U.S. most severely), the price of gold has risen. Thus, the decision to buy gold can be viewed as something of a shield to protect oneself against the ever-weakening dollar, as well as unforeseen economic crises. 

Flexibility

There are a plethora of avenues available for those looking to buy gold, so tailor your purchase to suit your specific needs and comfort level. Purchasing physical gold is of course a time-honored option, while others prefer to invest in gold ETFs such as GLD, gold mining companies or gold mutual funds to avoid the logistics of storing, moving, insuring, etc. There are possibilities for all budgets and levels of financial expertise. Personally, I find that simply buying GLD and some bling bling rare gold watches are the easiest methods, and the most fun.

Buffering Your Future

You could even consider an IRA backed by gold. Gold IRAs are relatively new, as they only became possible after the Taxpayer Relief Act was passed in 1997. The Act provided a superb option for those looking to reduce the volatility of their portfolio.  Indeed, an investment of $12,500 in gold coins 30 years ago would have resulted in a current net worth of approximately $250,000!

Slow Production + High Demand = Higher Gold Price

Production growth is slow and can’t keep up with demand. Gold production increased at the rate of 1.9 percent for the first 90 years of the 20th century, while in the past 20 years, it has grown at a mere 0.7 percent per year. Meanwhile, demand continues to grow worldwide, especially in China and India.  Did you know that in Vietnam, gold is their asset class of choice? With gold’s history of counter-cyclicality coupled with strength during uncertain times, the choice to buy gold has become extremely compelling.  The price of gold has come off 12% from its $1,800/oz high, and perhaps you could start owning a tiny piece of that golden, tennis court-sized cube. Performance Of Gold ETF: GLD

RECOMMENDATIONS TO BUILD WEALTH

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About the Author: Sam began investing his own money ever since he opened an online brokerage account online in 1995. Sam loved investing so much that he decided to make a career out of investing by spending the next 13 years after college working at Goldman Sachs and Credit Suisse Group. During this time, Sam received his MBA from UC Berkeley with a focus on finance and real estate. In 2012, Sam was able to retire at the age of 34 largely due to his investments that now generate roughly $250,000 a year in passive income. He is aggressively investing in real estate crowdfunding to arbitrage low valuations and take advantage of positive demographic trends away from expensive coastal cities. Updated for 2021 and beyond.

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