Should I Keep Physical Gold?
Wednesday, October 4th 2023
Gold has long been one of the oldest and most reliable investments available to us; people have sought this precious metal as a means of protecting and growing wealth over centuries. Even as investment options such as stocks, bonds, and cryptocurrency (1) continue to expand over time, many still view physical gold with fascination – we will explore whether you should keep physical gold by exploring both pros and cons so you can make an informed decision.
The Appeal of Gold
- Historical significance: Gold has long been prized for its beauty, scarcity and resistance to corrosion – qualities it served as an emblem for power and wealth during history as currency and store of value. Even today it remains highly prized as an investment option.
- Intrinsic value: Gold stands apart from stocks or bonds by possessing intrinsic value as it’s tangible asset; meaning no matter the economic climate it will always hold some form of intrinsic worth that makes investing in gold an appealing strategy to diversify portfolios against economic uncertainties and hedge against them. It makes investing in physical gold an appealing proposition.
- Inflation hedge: Gold has long been considered an effective defense against inflation. When money values decrease due to inflation (2), gold typically maintains or even increases in value – making it an attractive asset for investors looking to protect their wealth against its eroding effects.
Physical Gold vs. Gold ETFs and Stocks
- Physical gold: when investing in gold, one option is purchasing physical coins, bars, or bullion. Owning physical gold gives investors a sense of security because you directly own the assets they hold – plus emergency currency could come in handy in times of crises!
- Gold ETFs and stocks: Another method for investing in gold can be through Exchange Traded Funds (ETFs) and stocks of gold mining companies. ETFs offer investors exposure to the gold market without actually owning physical metal while investing in stocks of companies involved with exploration, mining and production of this precious resource is another effective means.
Pros of Holding Physical Gold
- Tangibility: Physical gold offers many advantages to investors. While stocks or bonds only exist digitally in an investor’s financial account, gold provides tangible security that many can feel from its physicality. This tangible quality may offer greater peace of mind.
- Privacy: Owning physical gold offers investors a level of discretion unmatched by other investment solutions. When purchasing coins or bars of physical gold, they can be stored safely or discreetly at a place known only to themselves – offering peace of mind to investors concerned with the security of their funds and investments.
- Counterparty risk: Holding physical gold can reduce counterparty risk, or the possibility that another party involved in financial transactions (like banks or brokerage firms) might default on their obligations, by eliminating dependencies on other entities for your investments. By owning gold directly, you no longer rely on their financial health for success.
Cons of Holding Physical Gold
- Storage and security: One of the chief drawbacks to investing in physical gold is its storage requirements and requirements, including those related to security deposit boxes or home safes. Furthermore, theft or loss is always a possibility when investing.
- Liquidity: Though gold can be purchased and traded, the process for selling or trading it may not be as seamless. Depending on its form of ownership, you may require finding buyers, negotiating prices, and organizing transport – making physical gold less liquid than other investments options and potentially leaving your funds available at short notice if an emergency arises that requires accessing funds quickly.
- Passive income: Unlike stocks which provide dividends and bonds which provide interest payments, holding physical gold does not generate any passive income – the only way your investment could yield any reward would be through capital appreciation when its price goes up.
- Taxes and regulations: Depending on where you reside, owning physical gold could be subject to taxes and regulations that include capital gains tax, sales tax, or import/export restrictions. Therefore, it’s crucial that all applicable laws and regulations regarding gold investment be known and observed.
Assessing Your Investment Goals and Risk Tolerance
Before investing in physical gold, it’s essential to carefully consider your investment goals and risk tolerance. If wealth preservation is your top priority and if storage and security worries don’t cause concern then physical gold might be suitable; otherwise, ETFs or stocks might provide more reliable liquidity options and passive income opportunities.
No matter whether you choose to invest in physical gold ETFs, or stocks of the yellow metal or both, it is crucial to keep your portfolio diversified. The allocation of a portion of it to gold has numerous benefits of diversification, since it usually has a low or negative correlation to other asset classes, such as bonds and stocks, thus lowering risks while potentially improving long-term returns.
Overall, when making the decision to keep physical gold as part of an investment portfolio it should be decided carefully upon. When taking into consideration factors like investment goals, risk tolerance, diversification needs, storage concerns, liquidity needs and lack of passive income it may be more appropriate to choose ETFs or stocks instead for more liquid investments and income-generation potential. Investing in physical form is worth consideration but any decision to invest must also fit within an overall plan that takes account of individual circumstances and objectives.
Ready to take control?
Now is the time to invest in some gold to hedge your retirement funds. Gold is a good investment for an IRA! Take a look at our list of the best gold IRA institutions – many of which are currently waiving charges for the first year of new clients.
Learn more about: American Hartford Gold Group precious metals IRA
Learn more about: Augusta Precious Metals precious metals
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Learn more about: Advantage Gold gold IRA
Learn more about: Birch Gold Group prices
Learn more about: Noble Gold trustlink
Learn more about: Rosland Capital reviews
Learn more about: Lear Capital review
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Learn more about: Oxford Gold Group gold IRA
Learn more about: Regal Assets bbb