Key Points
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Gold prices have surged recently.
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Gold prices tend to climb during periods of economic uncertainty.
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Gold can be a good inflation hedge, but be careful about investing in it.
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An important part of a well-thought-out investment strategy is diversification. It’s important to own assets across different classes, such as stocks, bonds, and even real estate. And you may be interested in owning gold as well.
But if you’ve been in the market for gold lately, you may have noticed that its price is surging. And this Reddit poster wants to know why.
There’s a simple explanation. And it might help you understand why gold could be a valuable part of your investment strategy.
What drives gold prices upward?
As of April 22, the price of gold was up more than 30% since the start of the year, according to the Associated Press citing data from FactSet. The stock market, by contrast, is down since the start of the year.
A big reason gold prices are surging is that many people are worried about an economic downturn. And gold is often considered a safe place to invest when the stock market is volatile and the economy seems like it’s headed in a negative direction.
When economic uncertainty abounds, it’s natural to want to park your money someplace safe. Gold is an established commodity with inherent value, so it tends to catch the eye of investors during times like these.
Also, when the value of the dollar decreases, the value of gold tends to increase. And there’s a good chance gold prices will continue to rise in the coming months, especially if economic uncertainty continues to plague investors.
Should you invest in gold?
There are a couple of benefit of investing in gold you should know about. First, gold has long been said to be a good hedge against inflation. And the reason is that because there’s a limited supply of it, its value is likely to rise over time.
Secondly, investing in gold is a way of diversifying your portfolio. If you have most of your assets in stocks and bonds, gold is another asset class you can move into.
Just look at what’s happening now. While stocks are tumbling, gold is soaring. It may not be the best time to buy gold, but it’s certainly a good time to own gold.
But if you’re going to invest in gold, be careful. Only buy gold from a reputable source. And if you’re going to invest for retirement in gold, know the rules.
There is, for example, such a thing as a gold IRA. But there are rules you have to follow about the quality of the gold you hold in that account and how your gold stored.
You may also want to talk to a financial advisor if you’re thinking of investing in gold and aren’t sure whether it’s right for you. A financial advisor can explain how gold might fit into your broad investing strategy. They may even be able to offer advice on where to buy gold so you don’t end up falling victim to a scam.
Finally, if you’re going to buy gold, you may want to start small. Going all-in on any new asset is a move you might regret.
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