Gold has been a sought-after metal for millennia. Throughout history, adventurers, kings, and generals have pursued the precious metal, which has been the objective of explorations, conquests, and wars.
Today, gold plays an important role globally in certain industries and as an investment. Central banks rely on gold as a major asset in their balance sheets. Let’s look at how you and your family can benefit from adding gold as an investment to your retirement account.
Gold Investing Protects Your Purchasing Power
The purchasing power of your wealth is heavily impacted by inflation and our money supply. Since the Great Recession, the Federal Reserve has kept interest rates historically low while adding trillions of dollars to the economy. Both policies were put in place to fight the recessions caused first by the meltdown of the housing market and now by the pandemic.
Below, we can see how the Fed dropped the interest rate at the onset of each recession while printing money at maximum speed, especially in 2020. (Blue line = interest rate; red line = US money supply)
Dollar-denominated assets, such as stocks and bonds, depend on our currency system, our government, and the Federal Reserve. When the Fed lowers interest rates and prints money, they create inflation, thereby eroding the purchasing power of the dollar and suppressing these dollar-denominated paper assets you want to use for your retirement.
One asset, however, is immune to Fed interference: physical gold. Here’s the proof: The purchasing power of the dollar has dropped 99% in a century, and as we can see below it has fallen over 35% since 2000, while the price of gold increased a stunning 577%! (Red line = price of 1 oz of gold; blue line = purchasing power of the US dollar)
The Fed recently loosened its grip and is now encouraging that we let inflation increase to 2% or higher. So, it is inevitable that inflation is coming. Here is the good news: Gold as an investment has an unprecedented ability to act as a hedge against inflation, protecting your wealth now and in the future, so with the Fed’s policy change and perceived outcome, it’s imperative that you consider adding gold to protect your retirement savings long-term.
Gold as an investment is true diversification
The key to a portfolio that protects and grows your wealth is diversification. By diversifying your retirement investments with assets that are uncorrelated, you ensure that you don’t lose your savings when one asset class crashes. This could happen when the stock market goes down as we saw it during the Great Recession and the pandemic and as we will see it during the next financial crises.
Most portfolios consist of paper assets such as stocks, bonds, and cash, so you want to add an asset that typically goes up when those assets go down. That asset is physical gold. As we can see below, gold (orange line) moves mostly in the opposite direction of the dollar (blue line).
In the graph below, notice how gold (orange line) is moving mostly in the opposite direction of the stock market (blue line).
And notice how gold has outperformed the stock market over the past 20 years. This is no coincidence. The price of gold is pushed up by the Fed’s money-printing schemes, and if you think the Fed will continue to print money (hint: they said they will), then you know where your investment in gold is headed.
The long-term success of your portfolio depends in large part on whether it is diversified and how. Gold as an investment has proven its value as a safe haven for 5,000 years by being the go-to asset for protecting wealth during wars, disasters, and financial crises. And it will continue to protect and grow your wealth for generations to come. We talk more about diversifying with gold here.
Gold as an investment offers privacy and security
Physical gold offers security not only as a safe-haven asset in your retirement investments but also as a tangible asset, one you can hold without the risk involved with third parties. This means that with gold you have an extra layer of security because your gold will be out of reach of the banking system, the government, and Wall Street. This affords protection in two ways:
- Avoid confiscation by the banking system, allowed in the Dodd-Frank Act to help banks bail themselves out in times of crisis.
- Avoid cyber theft. Over the past couple of decades, the rapid innovation in technology has made financial transactions easier, but it has also made them much more vulnerable. And since we’ll continue to see technological advances—where the financial system is often one step behind cybercriminals—financial transactions will remain vulnerable.
Where your mainstream assets, such as bank savings, are vulnerable to being frozen by the government or hacked, physical gold offers privacy and security in knowing it will continue to be out of reach of the banks.
Doesn’t it make sense to own precious metals as a portion of your IRA, safely stored where they will remain inaccessible to the government and financial institutions?
How to invest in a Gold IRA
This is where the Gold Alliance Gold IRA comes in. Setting up a Gold IRA is the best way to protect your wealth and prepare yourself for retirement where you will have physical gold and/or silver under your full control. By using gold as an investment, you will have peace of mind that your wealth is protected both before, during, and after your retirement.
Your well-diversified portfolio also contains mainstream assets such as stocks and bonds, but it is physical gold that provides the long-term safety and balance to your retirement plan and your retirement investments.