With persistently high inflation, stock market uncertainty and new concerns over the security of the banking sector, many Americans may find themselves looking more closely at their investments and savings. The recent collapse of both Silicon Valley Bank and Signature Bank, specifically, has left millions of Americans questioning how they protect their money — and if they should be spreading out their risk by investing elsewhere.
One alternative they could turn to is gold. Amid the bank news, gold prices and gold futures have both risen, leading many investors to wonder if they should invest in gold now. As usual, the benefit of any individual investment is specific to the individual. That said, recent developments may make now a great time to spread the risk by investing in gold.
Should you invest in gold amid bank uncertainty?
While every person's financial situation is different, there are some benefits to investing in gold, particularly in today's economic climate. Here are three advantages to investing in gold now.
Can act as a hedge against inflation and uncertainty
Gold isn't typically considered a way to grow your money as much as to protect it. Specifically, it's considered a hedge against the negative effects of inflation and market uncertainty.
"A rise in inflation or inflationary expectations increases investors' interest in purchasing gold and, therefore, drives up its price; in contrast, disinflation or a drop in inflationary expectations does the opposite," the Federal Reserve Bank of Chicago has previously noted.
"Over time, the value of gold tends to rise as the purchasing power of fiat currencies falls," Harry Turner, the founder of investment education website The Sovereign Investor, recently explained to CBS News. "This is because, unlike paper money or other types of investments, gold is a physical asset that can be stored and traded. As long as people continue to see it as a valuable commodity, the price of gold is likely to remain a good hedge against inflation."
If you think you could benefit from gold investing now, start by requesting a free information kit to help you decide.
Can diversify your portfolio
Trillions in retirement savings were wiped away last year, and stock market performance has been uneven in recent months. With new concerns over the recent bank failures, the market may still have a way to go before heading back up. In this environment, spreading out your investments and diversifying your portfolio makes sense. Instead of tying up all of your investments in bonds and stocks, spreading it among a variety of investment vehicles could better help you manage your risk and return. You'll also improve your chances of growing your money.
Just be smart about how much you invest in gold specifically. To take advantage of precious metal investing, most advisors recommend limiting the gold portion of your portfolio to 10% (many others would cap it at 5%). Speak to a financial advisor or get a gold investing information kit to determine the exact amount you should invest now.
Can be sold off quickly
Gold is advantageous for many reasons, including its ability to be sold off quickly if needed. Historically, there's always been a demand for gold, whether in coins, bars (bullion) or some other form. That's unlikely to change in today's economy. Gold remains a valuable asset (the current price hovers around $1,900 an ounce) that should be relatively simple to sell if you want to try a different investment in the future.
The bottom line
Like with any other investment, those interested should carefully weigh the pros and cons of gold before getting started. There are, however, multiple benefits to investing in the precious metal, especially now. Gold can act as a hedge against inflation and general economic uncertainty. It can also help diversify your portfolio and, if it doesn't perform as you want, can be sold off relatively quickly.
So start exploring your gold investment options now to see if it makes sense for you.
Source: CBS News