Asset Strategy, Market Insights, Precious Metal IRAs

Gold as an Investment: The Official Guide for Protecting Your Retirement

Gold Alliance disclaimer

In “Gold as an Investment: The Official Guide for Protecting Your Retirement,” we’ll cover everything you need to know about investing in gold.

We’ll show you how gold investing works, what the benefits are of diversifying with gold, what the future has in store for gold, and why some of the most successful investors in the world have recently invested in gold—some of them for the first time in their career.

Gold as an Investment: The Official Guide for 2021 explains everything that you need to know to be successful by investing in gold in 2021. Learn about Gold IRAs, market conditions, different gold products, and market forecasts.

An introduction to the benefits of gold as an investment

Gold is a very rare resource, which is one of the reasons it was chosen as currency and has maintained its value over thousands of years. With the advent of national currencies, gold is no longer used as a currency and its primary monetary function is as an investment asset.

Investors are seeking out gold as an investment because of its unique benefits that make it an excellent ingredient in any portfolio. The key advantages of including gold in your portfolio include the following:

  • Gold protects against financial crises and recessions.

  • Gold offers true diversification from stocks and bonds.

  • Gold safeguards your portfolio against stock market volatility.

  • Gold is a hedge against inflation, currency debasement, and the dollar losing value.

  • Gold protects against government debt and deficits.

  • Gold lets you be in control of your investment.

“Gold is the asset of the next decade.” Ray Dalio, 2019

Investing in the stock markets is often compared with gambling at a casino, but your retirement savings shouldn’t be gambled with. When the stock market drops, or currency loses value due to monetary stimulus by central banks, so does a retirement account that is invested only in stocks and bonds. This forces you to add several years to your working life to recover your losses. The best way to avoid this is to take control of your own retirement protection: Diversify your portfolio with physical gold.

Should you buy gold as an investment to protect yourself from growing US debt?

According to Bridgewater Associates, the world’s largest hedge fund, US debt has reached levels where it is risking the finances of our nation and its citizens, and gold has proven its value in protecting wealth from debt, so they recommend to their clients to invest a portion of their portfolio in gold. 

No one knows how much debt, globally, is too much debt. However, history shows that high levels of debt are associated with weakened economic growth. The graph below shows US federal debt compared to change in GDP:

Rising debt is associated with lower economic growth, which increased the risk of a recession and encourages gold investing.

The problem that is facing world leaders is the fact that we need more debt (both government and private spending) to boost the economy. And increased debt means higher risk of triggering a financial crisis. 

In those situations, interest rates will be increased in order to reduce private investment and raise inflation. If that happens, the implications will be significant for all Americans, especially the poor, the elderly, and the middle class. 

When a leading global investment firm such as Bridgewater Associates makes this kind of recommendation, make sure to take it seriously.

Why will gold continue to be a winning investment asset in the future?

Back in March of 2020, the stock market made its fastest correction in history. It has since recovered and even set new records, but this just shows the disconnect between equity markets and the real economy—the one most Americans are experiencing every day. The one where jobs are lost, small businesses close, and people are forced to say goodbye to their homes and, much worse, their loved ones.

Sooner or later, the reality will catch up with the stock market, poking a hole in the asset bubble and sending shock waves across the financial industry. Just how inflated is the asset bubble? Take a look below. The grey columns represent recessions. You can see that during the dot-com bubble and the Great Recession, stocks fell sharply. This is typical of every recession, other than the one we have now. While we saw a similar drop in March 2020, then, defying all logic, the stock market bounced back. Are we going to be the only recession in history where the market rises? Or are we just not seeing the full picture of where the market is headed shortly?

The stock market dropped during past recessions (in grey), but during the current recession stocks quickly bounced back, increasing the asset bubble. Protect your portfolio with gold as an investment. 

Gold also set a historic record in 2020. And once the air starts to seep out of the stock market bubble, investors who are pursuing gold investing will see gold rise even higher because that’s what gold does: it protects and grows your wealth during financial crises.

What role do precious metals play for investors in declining economies?

Gold is one of the assets which is the most uncorrelated with stocks— it means that when stocks go down, usually gold goes up. In fact, gold’s correlation with stocks and other investments typically drops further during a recession. 

When the economy enters a recession, most investors will see their stock portfolios drop. However, investors who understand how assets correlate and who know the simple rules you need to follow can avoid and eliminate their losses altogether.

Investors who own uncorrelated assets minimize their risk of losses. Most portfolios include assets such as bonds and stocks, but neither of these effectively hedge against large market declines, which tend to wipe out assets across the board.

That’s why an increasing number of investors turn to gold investing. 

This is evident in the graph below, where we can see how gold, in most cases, has increased in value during recessions (grey columns) and stock market crises.

Gold as an investment typically increases in value during recessions (grey columns)

When the economy enters a recession, gold as an investment protects your portfolio—and most of the time, gold investing even grows your wealth when other assets tumble.

Why investing in gold is the best option for seniors

Before the pandemic, there were many great investment opportunities. You could invest in stocks, bonds, real estate, gold, startups, IPOs, your own business, or your professional education. With state-mandated stay-at-home orders returning and affecting the markets, our choices are becoming much more limited again today. 

Many of us have built our retirement portfolio over many years, and we’re now experiencing a time with extreme financial conditions, so we must be proactive. 

With the volatility of the stock market and the bond market, we have a great opportunity for a successful investment in gold. The government and the Federal Reserve are continuing to add a tremendous amount of money to our money supply, which means the price of your gold could rise many multiples from its current price, whereas the stock market bubble is bound to burst anytime.

Should seniors diversify their portfolios with gold?

By choosing to invest in gold, you are choosing to place a portion of your funds in a physical, tangible asset and not a paper asset like stocks and bonds, which gives you optimal diversification and protection against financial crises, but more than just that.

You’re removing the funds used to acquire gold from the banking and financial system completely. When you own gold, you have diversification not just in a separate asset class but also from system, banking, and government risks. 

All investments come with risks, and if you invest in just one asset—stocks, for instance—you risk losing a significant part of your investment if that asset crashes. You also risk losing growth opportunities in assets outside the stock market because they may appreciate more than stocks. By diversifying your portfolio, you spread your risk across different assets and reduce the impact on your investment of a stock market crash or other financial crisis. 

Diversifying with gold as an investment means that you spread your risk among several asset classes.

Diversifying with gold allows you to benefit from the following characteristics of the precious metal:

  • Gold as an investment preserves wealth

  • Gold investing hedges against stock market volatility and currency depreciation

  • Gold protects your investment during times of disaster

How does inflation affect the economy and gold investing? 

Inflation means higher prices for goods and services, reducing the purchasing power of your hard-earned dollars, which will worsen the economy and increase demand for safe-havens assets such as gold.

As inflation continues to rise, it can quickly spiral out of control. We saw that in the 1970s where the ravaging inflation forced many Americans to postpone their retirement, while others were pushed into poverty.

But Americans are also affected indirectly by inflation. Our government has to pay more for its services too, which forces them to raise taxes.

Now, you see the double whammy: our purchasing power declines, and a larger portion of what we have left will be taken as taxes. 

Inflation is coming back—the Fed has gone as far as promising us they will let inflation rise. It’s crucial that investors prepare for a scenario where hyperinflation returns. Consider gold as an investment with its 5,000-year history of not only protecting but also growing wealth.

Could the fear of hyperinflation cause gold prices to rise?

The Fed has chosen to let inflation rise, which increases the risk of hyperinflation like we saw in the 1970s and increases the demand for gold, thus pushing gold prices higher.

Rising inflation puts the Fed in a difficult situation. To confront inflation, our central bank would need to tighten its monetary policies, which means raising interest rates. This would paralyze our economy just as it’s trying to get back on its feet. It’s a guaranteed depression trigger. The other option is to just let inflation rise. The last time it did this was in the 1970s, and inflation didn’t stop until the Fed had raised interest rates to 19%! That’s the Stagflation Decade, when gold rose over 2,100% and silver skyrocketed almost 3,300%.

The Fed has already made its choice when it declared it would allow inflation to rise while keeping interest rates low and printing more money. The central bank has always preferred to “kick the can down the road.” This time will prove no different, and inflation could quickly spiral out of control in the coming months. Gold as an investment will be your best friend when hyperinflation returns—we’ll see the price of gold soar to new heights.

Gold as an investment vs the US dollar

By investing in gold, you protect your purchasing power—the dollar has lost 99% of its purchasing power against gold.

The US dollar is considered the world’s reserve currency, so shouldn’t we expect to be superior at storing wealth? The truth is, however, that the dollar isn’t worth much today: ninety years ago, one ounce of gold cost $20, and in modern days the precious metal is valued at around $1,800. 

Gold as an investment beats the US dollar in its ability to retain purchasing power.

The reason is simple: massive money printing by our central bank has diluted the dollars in your bank account as the purchasing power of the dollar continues to weaken—just in 2020 alone, the greenback lost 10% of its purchasing power. Our government’s soaring debt is forcing the Fed to continue printing money to infinity and to keep interest rates low, as the Fed chairman claimed this year they would, causing further inflation. And if you’re in doubt whether gold investing is for you, just look to the central banks themselves: they are hoarding gold at the fastest pace in half a century—they want to protect their balance sheets, just like you should protect your retirement savings.

Can your retirement portfolio withstand negative interest rates?

You can protect your retirement portfolio with gold because it doesn’t incur negative interest rates, nor is it debt or a liability to anyone.

Negative interest rates is a bizarre concept. The implication of negative interest rates will lead banks to pay the central bank for storing their funds there, and you to pay your bank to store your funds at the bank. This is an indirect tax on financial institutions, as well as on you, and encourages spending and lending by the banks instead of storing their funds with the central bank. Several central banks have implemented negative rates, including the Bank of Japan and the European Central Bank, and there have been many calls in Washington to have them implemented here.

Negative rates therefore increase debt, including loans to riskier borrowers who might otherwise be considered too risky. After all, if the bank doesn’t lend them money, they’d have to pay a fee to the central bank.

But there is a simple solution to negative rates: gold. Holding physical gold will not incur any negative interest rates. Gold as an investment is one of the very few safe havens in today’s economy, and the precious metal historically performs well when interest rates are low. 

The central banks know this, of course: Russia and China, for instance, have been buying up massive amounts of gold. This increases the pressure on the US dollar and further strengthens the price of gold. 

As an investor, it’s crucial that you consider gold investing as part of your portfolio to protect and grow your wealth. With negative rates on the horizon, anyone holding gold will be gaining from just holding the metal.

Why is gold investing is great insurance against the next recession

From an economic perspective, gold’s ability to preserve wealth will cause it to outperform other assets during the next recession.

During times of uncertainty, paper based assets like stocks and bonds often fail, but gold’s unique qualities mean that the precious metal may safeguard your wealth when other assets start to crumble. Gold stands out because it’s one of the assets least correlated to stocks, especially during recessions. 

Gold as an investment is the asset that’s the least correlated with stocks during recessions, thus protecting your retirement savings in a Gold IRA.

Including gold as an investment in your portfolio is critical if you want to preserve the value of your investments and retirement savings during recessions. 

Now is the perfect time to insure your portfolio with physical gold. With the current fiscal and monetary policies of our Federal Reserve and with our government running deficits, investors will seek out gold to protect their wealth, increasing first the demand for gold and then its price. 

In fact, gold may become unavailable during the next serious crisis, no matter how much you are willing to pay. Once the damage has been done, you will be unable to insure your portfolio with the precious metals at today’s price, and enjoy its ability to protect and grow your wealth.

How you can protect your retirement from the Fed’s “no-win” economic tactics

The Fed has no option to keep our economy from completely collapsing by continuing to print $Trillions in new money and keep interest rates low, which is good for gold holders, as the precious metal will continue to soar.

Recent years has been a rollercoaster ride for the stock market. It fell apart in March, rebounded, then dropped another 10%, and now back to record highs. The Fed joined the ride, trying to keep up by lowering interest rates, printing money, and actively buying bundled debt. In June, the central bank started buying debt from individual corporations for the first time in history, thereby indirectly supporting individual companies’ stocks—stocks that are part of many investors’ retirement portfolios.

You may not care who is holding the value of your retirement account, but when the market is not “real”, and artificially held up, you need to understand that this has to end badly for your investments in the markets, the value of your home and real estate investments, your retirement, your business, and the economy overall. The Fed is now putting the last 20 years of loose monetary policies on steroids because of the pandemic, and the central bank has just trapped itself in endless money printing and quantitative easing.

However, there is good news: while all the money printing and debt is bad for the dollar, it is good for gold as an investment. And since the Fed has no choice but to stick to its current policies, the price of gold has no choice but to increase. That’s why you should consider gold as an investment today.

How does a Gold IRA help seniors protect their retirement? 

A Gold IRA protects you from current and future weak market conditions by acting as a hedge against the market, US Dollar inflation, and possible worst case economic scenarios.

As a retirement saver, you should prepare yourself for any situation that could jeopardize your savings. Today’s financial climate is characterized by a weakening economy, the continuing recessions, international conflicts, and a declining dollar. 

With all those obstacles on your road to a happy retirement, we are fortunate that there is a way you can manage and significantly reduce the risks facing your retirement savings: by holding a portion of your portfolio in physical gold and silver in an IRA. History shows that precious metals offer the strongest stability your portfolio needs during times of volatility because they effectively diversify your portfolio. 

The 1997 Taxpayer Relief Act allowed Americans to own and maximize the benefits of physical precious metals in a self-directed IRA without any tax consequences or penalties. It allows you to protect your hard-earned retirement savings by combining the power of tax-advantaged growth with the substantial benefits that come from owning physical gold bullion and coins.

The process of starting a Gold IRA with Gold Alliance consists of three easy steps:

  1. Open a Gold IRA

  2. Fund your Gold IRA

  3. Select the gold bullion and coins that best meet your investment goals.

A Gold Alliance portfolio manager will be assisting you along the way to answer any questions you may have and provide all the information you need to make the best decision for you and your family.

How can diversifying your portfolio with gold help mitigate investment risk?

Every investment portfolio should include one or more safe-haven assets to balance the riskier assets, such as stocks and bonds, and since the recession will last well into 2021, gold as an investment will yet again dominate. 

If your portfolio doesn’t already include a safe haven such as gold, now is a good time to consider gold as an investment.

It’s a good idea to frequently evaluate your portfolio to ensure you have the right mix of assets depending on the current economic situation and what financial experts predict for the coming year. One of the indicators financial analysts normally examine is the credit cycle, but there is no “normal” these days: government debt is record-high while the Fed is continuing to print money and keep interest rates low, flooding the economy with cheap capital.

Investing in gold can protect your retirement portfolio against the next crisis caused by the cheap capital that is flooding the market thanks to money printing (in blue) and low interest rates (in red).

Confidence in the dollar is dropping, just like we saw it in the 1970s. How did the cycle end then? Stocks and bonds imploded while gold prices soared. Today, we’re at a breaking point. Either the Fed can keep the dollar system from falling apart for another credit cycle, or the system itself will shatter. 

Only one asset is sure to survive, like it has for 5,000 years: gold. So, it’s no wonder that several experts are predicting that gold will see new highs in the near future, making it the preferred safe-haven asset for your investment portfolio.

When is a good time to invest in a Gold or Silver IRA?

Although recent years have been very good for gold as an investment, the future could see a new record price because of the continuing recession, massive money printing, and a looming stock market crash, so yes, gold is still cheap today.

In 2020, we saw the price of gold soar to a new high amidst the pandemic, and prices are remaining high. But you’re not too late to join the gold rally because the current conditions are positive for gold:

  1. The recession is continuing.

  2. The Fed is continuing to print money.

  3. The Fed is keeping interest rates at record-lows.

  4. The Fed is allowing inflation to rise.

  5. The dollar is weakening, losing its purchasing power.

  6. The stock market is in a bigger bubble than ever before.

This is the situation today, and this will be the situation in going forward as well.

Gold at $1,850 an ounce seems like a high number, but that number is misleading. Our paper money today has lost so much value that it’s simply our bias that makes us think that $1,850 per ounce of gold is a lot. When we consider the factors above, it’s clear that the future looks bright for gold, which is why banks such as Citibank and Bank of America are predicting that gold will reach $3,000 in in the next 10 years. 

It’s also worth noting that the money printing that the Fed has already done in 2020 eclipsed that of 2008 to 2010. Back then, the gold price went up close to 3-fold. Today, we’re only about one-sixth of the way there so far.

5 reasons gold IRAs and 401ks will continue to grow

The coronavirus pandemic, trade wars, rising unemployment, and earnings reports expected to be pessimistic are all factors that will cause precious metals to soar. 

Over the last 20 years, gold has brought an average annualized return on investment of over 26%, beating all major investment assets by a mile. Here are 5 reasons why gold is predicted to keep rising:

  1. With a resurgence of COVID-19 cases this winter, several states are seeing their case numbers increase as hospitals are nearing their full capacity once again. The continuing pandemic prolongs the recession, increasing the demand for gold as investors want to protect their assets

  2. Trade tariffs on Europe lead to political and economic uncertainty, which will push gold higher. 

  3. Should the US– China trade war escalate, a trade deal will seem more unlikely, and investors are bound to seek out precious metals to mitigate risk.

  4. Renewed lockdowns will lead to small-business closures and increased unemployment, which will increase downside risk for the stock market and increase the demand for gold as an investment.

  5. As we are nearing the end of the fourth earnings quarter, the pandemic will result in cautionary notes from US companies. This will impact the stock market negatively, putting a stop to the rally and increasing the demand for gold.

What does the Buffett Indicator mean for gold and silver?

A trusted indicator of the value of the stock market is the Buffett Indicator, and it’s flashing its biggest warning sign ever, which means the stock market is extremely overvalued and it’s time to protect your portfolio with gold investing. 

The indicator is named after Warren Buffett, who calls it the single best way to tell if stocks are overvalued. As you can see below, stocks have never been more overvalued than they are today:

Protect your investments with gold as an investment - the Buffett indicator shows that a stock market crash is looming.

The indicator divides the total value of all assets in the market by the total size of the economy (GDP). Consensus is that a reading of 80% shows a fair valuation of the stock market. Today, the reading is twice that at over 160%. By this measure, stocks are frothier, bubblier, and riskier than they’ve ever been—even in the months leading up to the 2000 crash and the Great Recession.

Once the bubble bursts, we’ll be witnessing the most severe financial crisis in history. No one can say when that will happen, only that it will happen eventually. And by then, investors have hopefully protected their portfolios, including their retirement savings, with a safe-haven asset such as gold.

What do financial advisors think about gold as an investment?

Ray Dalio, founder of the world’s largest hedge fund, Bridgewater Associates, recommends that his clients invest in gold and has reportedly hundreds of million of dollars invested in gold himself. Dalio is also widely considered the leading expert on financial investing, with his company managing over $140 billion in assets.

Smaller financial advisors are not necessarily financial investors, and their firms are also limited in their choices—they don’t offer physical gold or understand it, so they don’t recommend it. They know a lot about stocks and bonds but may not know much about commodities such as gold and other precious metals. 

Most of you have probably never heard your financial advisor recommend gold. Even if you asked them about gold investing to diversify just a portion of your portfolio, most financial advisors would treat you as if you were mad. Instead, watch what larger leading financial investors are doing. 

If we look at this graph, it should be evident why gold is so popular among leading financial investors. It compares the gains in gold (orange line) with gains in the Dow Jones (blue line).

Gold as an investment gains multiples of the gains in the Dow Jones.

Every well-diversified portfolio should own stocks and bonds, but don’t let your financial advisor tell you to not invest in physical gold. You don’t want to limit yourself to paper assets and miss out on the gains gold have seen over the past 20 years: gold saw an average annual return of over 28.9%, beating your typical stock and bond portfolio’s gains over the same time by over 300%.

Which billionaires and high profile investors have invested in gold? 

Several financial heavyweights opened their eyes to gold as an investment, including Warren Buffett and Ray Dalio. Why? The current gold bull market, which resulted in August historic gold price, has lasted a few years now, and the continuing pandemic is increasing the risk of another stock market meltdown. Some of the billionaires who’ve invested in gold have previously spoken strongly against gold investing, but they have now had to recognize the qualities of the precious metal.

One of them is Warren Buffett, who poured over half a billion dollars into gold in the summer of 2020. Another billionaire investor who had so far stayed clear of gold is Sam Zell, who bought gold for the first time last year. Ray Dalio, who founded the world’s largest hedge fund, invested almost half a billion in gold, urging investors to “sell stocks, buy gold.” A less familiar name is Naguib Sawiris, the heir of Egypt’s wealthiest family. But his name will soon become more familiar: in 2018, he invested half his $5.7 billion fortune in gold—an investment that has now returned over $1 billion!

If you’re ever in doubt about the validity of gold investing, just look to these financial moguls and trendsetters.

What are good reasons to consider a gold IRA or 401k if you’re over the age of 55?

As you approach retirement, the risk exposure of your IRA or 401(k) becomes a higher priority, and you should consider adding gold investing to your portfolio to protect and grow your wealth. History has shown just how important it is to diversify a portion of your portfolio with precious metals. It’s been an incredible year for gold investing, and physical gold stands out as a safe-haven asset that should be part of any investment portfolio, especially the closer you get to retiring. Below are the top 5 reasons you should invest in a Gold IRA when you’re 55 or older.

  1. Gold as an investment protects against recessions and financial crises. For over 5,000 years, gold has survived—and even thrived—during financial crises, hyperinflation, revolutions, and wars. The unique qualities of the precious metal mean that gold investing will protect your retirement savings when other assets, such as stocks and bonds, tumble.

  2. The price of gold will keep rising. In 2020, gold saw a tremendous increase, setting a new all-time record at $2,067.15 per ounce. But according to Bank of America and Citibank, the precious metal could climb as high as $3,000 per ounce in 2021, so you still have time to join the gold rally and enjoy the benefits of gold investing.

  3. A Gold IRA protects your wealth against inflation. The Federal Reserve is keeping interest rates record-low while printing trillions of dollars. The result? Inflation. This erodes the purchasing power of the dollar. Gold, on the other hand, gains value during inflation, thus protecting your portfolio.

  4. A Gold IRA offers true diversification. A diversified portfolio contains assets that are uncorrelated or inversely correlated, creating a balance that protects your investments. Since gold typically goes up when paper assets such as stocks and bonds go down, investing part of your retirement savings in gold protects your wealth.

  5. Gold as an investment is out of reach of Wall Street. With physical gold, you own an asset you can hold in your hands, a tangible asset that’s safe from cybercrime and confiscation, which are risks that Wall Street and the banking system are facing.

How can you make sure your retirement plan includes good growth?

The key to a successful plan for retirement is to grow your purchasing power, not necessarily to grow the amount of your dollars. By diversifying your retirement savings with an investment in gold, you are protecting yourself from the current erosion of the value of our currency, your investment will benefit from the precious metal’s unique ability to retain its purchasing power and grow in value during recessions. 

In doing so, you and your family can enjoy your hard-earned wealth for decades to come. For the same reason, you’ll also want your IRA or 401(k) to be protected against financial crises, political uncertainty, and geopolitical tensions both before and during your retirement.

What are good tips for Seniors considering a Gold IRA or Gold 401k?

When you’re considering gold as an investment as part of your retirement plan, you’ll benefit from all the benefits listed throughout this article. But, practically speaking, what should you keep in mind when you’re planning your gold investment? We’ve compiled a list of 7 essential tips about gold investing, which is summarized below:

  1. Only invest in physical gold, gold stock suffers the same risk as the market

  2. Remember the end goals your retirement investment 

  3. Avoid third-party risk and only consult with reputable Gold IRA companies

  4. Buy the most liquid coins and bars

  5. Add to your gold investments over time and build up your portfolio

  6. Only buy and sell your gold through a reputable and respected precious metals dealer

  7. Sit back, relax, and watch your money grow from your gold investment

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