What Are the Advantages of Owning Gold?

Gold has proven its worth since antiquity.

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As a finite and rare resource, gold has been valued by humankind for over 5,000 years as a reliable store of wealth.

Time and again, physical gold has proven that it can withstand inflation, financial crises, market collapses, political unrest, and the financial effects of wars far better than paper currencies (like the dollar) and paper assets (such as stocks and bonds). Its unique properties as a historic safe-haven asset make gold the go-to asset for anyone looking for financial security.

If you don’t own gold, you know neither history nor economics.

Ray Dalio, 2019

Here’s why you should acquire gold today

Gold offers true diversification

By allocating your investments across various financial assets, you reduce the risks facing your portfolio when some of the assets crash. Even if your portfolio consists of stocks and bonds that are spread across different companies, sectors, and countries, its success is still tied to the health of the global stock markets because all stocks and bonds are correlated on major market movements. In 2008 we saw a large cyclical correction where paper assets moved in tandem, and if you had invested 100% of your portfolio in those assets, you would have suffered heavy losses.

Because gold tends to increase in value when dollar-denominated stocks and bonds go down, the precious metal gives you peace of mind for the long-term success of your portfolio regardless of US or global downturns and crises.

Gold protects against crises

Investors call gold the “crisis commodity” because of one of the metal’s fundamental traits: It can hedge against economic uncertainty, financial crises, political turmoil, and even military conflicts.

When investors wanted to escape risky stocks and bonds after the financial crisis in 2008, they turned to gold. As a result, the price of gold jumped from below $700 per ounce to over $1,900 per ounce in just three years. This happened again in March 2020 when the pandemic lockdown occured: The stock market crashed, and gold surged 30% in value providing stability to portfolios in an extremely unstable time.

History shows us that there is always another crisis coming. While we don’t know when it will happen or what will trigger it, we know it’s important to be prepared, to be protected. That’s why it’s never too early to diversify with physical gold.

Gold hedges against inflation

Inflation is a consequence of the Federal Reserve’s money printing, which has been significant over the past 20 years. During the pandemic alone, the central bank added over 5 trillion dollars to the economy, so it is no surprise that we are seeing inflation rise.

Meanwhile, gold has provided an annualized return of over 26% since 2000, while the dollar has continued to drop in value.

As a store of wealth, physical gold has historically maintained its purchasing power and has even grown in value during inflationary periods, and it performed astonishingly well when the Fed loses control of inflation. The last time we saw runaway inflation was in the 1970s and 1980s. During that period, the price of gold climbed 8-fold, and the precious metal was the best-returning asset of the decade, providing tremendous growth to anyone holding it.

Cumulative real returns through 7 inflation periods chart.

If you have any doubts about the results of the Fed’s handling of the economy and inflation, it’s time to add gold to your portfolio.

“Gold is money. Everything else is credit.” – J.P. Morgan, 1912

Gold protects against government debt and deficits

Since 2000, the US national debt has grown 5-fold and is now close to $30 trillion. Over the same period, the price of gold has jumped 530%, an annualized return of over 25%. As our government keeps increasing its deficit spending, the value of gold is likely to keep rising as well. The latest forecast, according to Goldman Sachs, is that gold could reach $2,500 soon.

Gold protects against stock market corrections and crashes

When investors lose confidence in the stock and bond markets and get scared, they move into gold, causing its value to rise. Every stock market correction in the past 20 years was accompanied by rising gold prices, and investors who had allocated the right percentage of their portfolio to gold were able to offset their losses on stocks. This is why gold provides true diversification to stocks and bonds.

Central banks own gold

Central banks have been buying up huge amounts of gold over the past decade, and they now own 20% of all gold ever mined as money on their balance sheets. They understand the benefits of owning a tangible asset, and since they are holding that much gold, they have an interest in its success. If the most powerful and sophisticated institutions in the world own gold, shouldn’t you?

Start diversifying your wealth today

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