Gold prices are 30.23% higher than in 2023, and silver is up by 22.77%. Why do you think that is? It really has to do with a number of factors, but one of the biggest is that people want an asset that gives them peace of mind against a world of chaos.
How do you begin investing in gold? Here’s some of the most common gold questions investors ask about buying physical gold and other precious metals.
If you are just getting started researching if gold or silver should be part of your strategy, this article covers the most common questions we’ve heard in our 40+ years as a gold dealer.
1. Why do investors consider gold a safe-haven asset?
Investors consider gold to be a “safe haven” because it’s tangible and it’s not impacted by many risks like:
Not relying on someone else to come through.
It can’t get hacked or messed with digitally.
Not impacted by what the stock market’s doing.
You can’t just make more of them easily.
Reddit user VZR in the r/Preppers forum shared their thoughts:
“Gold has historically been seen as a ‘safe-haven’ of value because it is rare, difficult to counterfeit, fungible, and easy to store/transport/hide as a store of value. These reasons are why it was used as coinage for thousands of years, after people moved off the barter system.
Since it is a ‘safe-haven,’ its value goes up during uncertain times since there is a great demand for a safe store of wealth and the supply is (relatively) constant. If you buy a lot of gold in good times when it is cheap, then you ‘make money’ when it becomes more in demand.”
2. How does gold diversify an investment portfolio?
When you buy pure gold or other precious metals, your asset is completely separate from other investments. It doesn’t behave the same as stocks, bonds, or other instruments. So, if things go wrong with your other assets, your gold and silver can still be performing well.
It’s the whole strategy of “not putting all your eggs” in one basket. Experts like Morningstar recommend that you hold gold but keep the percentage to no more than 15% of your total portfolio. They also recommend a ten-year hold to maximize the benefits of this diversification strategy.
Reddit user PieceOfMined1290 shared inside the r/Bogleheads forum:
“Gold is insurance and savings. I love simple investing, and I love gold as well.”
3. How does gold protect against inflation?
Gold and silver create a barrier around your money to protect it from the effects of inflation. Here’s how:
Tangible asset: Both metals are physical assets. They aren’t paper assets that might turn worthless overnight.
Store of value: When inflation rises, the cost of these metals usually goes up too. It’s not always a one-to-one match, but holding gold bars or coins might be better than watching your cash become worth less.
Limited resource: Governments can print more money, but they can’t make more gold or silver. There’s only so much gold on the earth. As a finite resource, the value increases when there’s a higher demand.
Purchasing power: Over time, gold tends to keep its purchasing power. An example is 20 years ago, an ounce of gold could buy you a nice suit. Fast forward to today, and an ounce of gold can still buy you a nice suit. The dollar amount might be different, but the purchasing power stays steady. It’s not like you suddenly have more money; it’s just that you have the same buying power you started with.
User My-Cousin-Bobby shared in the r/Investing subreddit:
“The reason that gold/silver/commods get tagged as an “inflation hedge” is because they’re deprived of other types of risks you’d encounter in the market. Pure commodities don’t have business, operation, or credit risk… it’s pretty much entirely currency risk (I guess you could technically say it has some level of market risk and/or liquidity risk).
So, yes, the stock market is essentially a hedge against inflation as well, but commodities remove a lot of the other risks you would encounter, making it more of a “pure” inflation hedge.”
4. How does gold do in economic uncertainty?
People start buying gold when they worry about the economy. This is because they want an asset that isn’t impacted by a weak jobs report, bad real estate sales data, or poor corporate earnings. And then, because people turn to gold, the prices increase.
A recent Gold.org survey of central bank reserve managers shows that 82% hold gold for its performance in a crisis.
5. Are there tax advantages to investing in gold?
If you are buying these assets outside of retirement accounts, there aren’t any tax advantages or differences in taxes than you’d see with other assets. For example, you’ll still have capital gains tax at varying rates depending on your situation. You also may have sales taxes, depending on where you live.
But, if you are buying inside of a retirement account like a Gold IRA, you’ll get all the benefits you’d see with a traditional IRA. This includes tax-deferred or tax-free growth, depending on the type of account you own.
6. How easy is it to sell gold?
The answer depends on the type of metal you own. Small amounts, like gold coins or small bars, can be easier to sell. Government-minted metals are also easier to sell.
And, if you buy from a precious metals dealer like Swiss America, you can leverage our buy-back program when you want to sell. If you aren’t a Swiss America customer, you can sell to local bullion companies or online marketplaces.
7. How do gold returns compare to stocks and bonds?
The reason for buying gold, silver or platinum isn’t to beat the market or get higher returns. It’s more of an insurance policy to protect wealth and diversify assets.
Even though that’s the case, gold still has a decent performance compared to other assets, depending on the year. For example, in this chart from Proactive Advisor Magazine for 2023, equities have the highest long-term return at 10.66%, but gold outperformed treasuries, commodities, and the dollar.
8. Does gold protect against currency devaluation?
Many investors watch currency trends and worry about the value of the U.S. dollar due to government policies or the economy. In times of devaluation and reduction in the purchasing power of the dollar, they turn to gold as a store of value. This is because pure gold is a universal currency that you can use no matter where you are in the world.
We discuss the devaluation on our podcast as well as the impact of country alliances like BRICS.
9. Why own physical gold instead of paper assets?
One of the things about paper assets is that they can disappear overnight. There are countless stories of stock market crashes that wiped out investor’s wealth. It could be because there’s a mad panic about the economy, it could be that there’s an “asset bubble” like the Dot Com era or potentially AI era. Or, it could be that a large company like Apple or Nvidia fails to meet its earnings, and all related companies immediately lose their value, too.
If you own physical gold, you still own the asset, no matter what happens. And you only lose money if you sell it for less than you paid. It’s like real estate, which is also a tangible asset. Consider everyone who owned property during the housing crash but still kept the asset coming out ahead 12 years later when the pandemic hit.
10. How does gold compare to silver as an investment?
This is a question we get all the time. Generally, pure gold is a better investment for price increases and if you need to sell quickly. But since gold is now at $2700 + an ounce, some people need a metal like silver with a smaller entry price point.
Both assets have limited supply and industrial demand. But gold has a higher potential as an investment over time. In the r/Gold subreddit a user shares:
“Silver will be more volatile, and gold will be more stable. The younger you are, the riskier/greedier you can be (leans towards silver), while the older you get, you’ll favor gold to preserve wealth.”
Another user talks about the portability of gold: “30k in gold fits comfortably in my pocket. 12k in silver and I need a steel box and a good deadlift.”
Still, there are many investors who love silver because of its affordability and the different types of coins they can collect.
If you’re considering silver, look at the current industrial demand trends. It’s a more volatile metal because most of the demand comes from manufacturing and applications. If there’s an economic slowdown, silver may not perform as well as gold.
11. Is gold a better investment than platinum?
Platinum is very much like silver in that its price ties closely to industrial demand. One of the biggest industries to use platinum is the auto industry, which uses the metal in catalytic converters. If the demand for standard gasoline-powered automobiles falls, platinum prices fall.
However, increasing green energy and innovations in this space might increase demand. Platinum can be a good investment because it is rare, there’s only so much we’ve discovered, and it’s harder to mine than gold.
Just know that comparing the two metals is like comparing apples and oranges. This is because the biggest driver of gold prices is investment, while the biggest driver for platinum is these commercial uses. So, you may want to add some platinum if you think this market might grow.
12. Is it better to invest in physical gold or ETFs?
The answers here depend on your situation. Most investors want to own a tangible asset because this gives them the most completely independent investment. Even if you buy ETFs or gold mining stocks, you have all the risks of paper assets, like relying on someone else’s performance or cyber risks.
In our opinion, the best gold investment is the actual thing… physical gold.
13. How do I store my physical gold?
If you own precious metals in your retirement account, your IRA custodian handles all the storage. This is because the IRS won’t let you actually take possession of your metals until you reach retirement age.
But, if you buy these precious metals directly outside of a precious metals IRA, you can store them wherever you want. Most people use one of these methods:
Home storage in a safe or secure location.
Using a bank safety deposit box.
Paying for a third-party secure depository.
14. What are the risks involved in gold investing?
Like all investments, silver and gold have risks. You might buy at one price, and then when you need to sell, the pricing may be lower. Or, if you decide to store your metals at home, you could lose them to theft or a disaster. Consider the various pros and cons before you start investing.
You should always buy from a reputable dealer like Swiss America so that you don’t have risks of scams like fake or low-quality gold.
15. How do I buy gold and silver bullion or coins?
When people are first looking to buy, they don’t always know how the process works. It’s actually very easy to get started “stacking gold or silver”. Here’s how it works:
Talk with a precious metals expert about your goals and investment plans.
Open an account and choose the metals you want to buy.
Decide if you want the metals shipped to you or if you want to store them in a depository.
Manage your account online, where you can see real-time investment status.
16. Can I add gold and silver in my retirement account (IRA or SDIRA)?
Yes, this is a path many investors take to protect their retirement funds. The IRS rules include:
Choose a precious metal IRA custodian who manages the account on your behalf. Their role is to follow your direction on buying/selling gold, silver or platinum, handle storage with a depository, and take care of annual reporting.
Compare custodians to find the best pricing on account management and other fees.
Your precious metals dealer works in conjunction with your custodian. And, your dealer can advise you on IRA-qualified metals because the IRS has certain purity and manufacturer requirements.
All the same retirement and tax rules with a traditional IRA apply to these specialized precious metal, silver bullion IRA or Gold IRA accounts.
17. What is the best time to buy gold?
You really can’t time the market for these assets. Plus, the reason you buy these assets in the first place isn’t to make a return. Instead, you buy as an insurance policy to protect your wealth.
You can always keep track of what’s happening in the market and look for indicators where prices might rise or lower, like:
If the Federal Reserve lowers interest rates.
If government policies place a hold on new mining.
If people expect the economy to be rocky.
If global tensions escalate.
If you think the value of the dollar will decrease.
Even when the cost per ounce rises, we believe it’s always a good time to buy gold. Many investors use a strategy called ” stacking,” which is similar to dollar cost averaging. It simply means that you buy these metals in smaller amounts over time, so you buy your gold investments at different per-ounce prices depending on the market.
18. How do I know if a gold dealer is reputable?
We’ve written about this a lot because no one should be a victim of a gold scam. There’s a number of things you can do to vet a dealer before you buy, including:
Look for companies that have been in business for decades.
Don’t work with any company that predicts or says they can guarantee returns with little or no risk.
Be cautious if the company uses high-pressure tactics to convince you to send or transfer cash immediately to the firm.
Be very skeptical if you get unsolicited phone calls about investments from offshore salespersons or companies you don’t know.
Check with fraud-prevention authorities like CFTC (www.cftc.gov).
Look for positive reviews going back for several years.
Verify all the data about the company, including information about its location and BBB rating.
Make sure you know about all fees and commissions up front so you don’t have any surprises when you go to buy.
19. What are the tax rules for selling gold?
Some people might think that you can sell gold without paying taxes, but that isn’t true. Just like any investment, if you make money when you sell, you’ll have capital gains taxes. The IRS sees physical gold and gold coins as “collectibles” for tax purposes which has a higher tax rate than other assets. Capital gains tax parameters include:
Short-term capital gains: If you sell gold within one year of purchasing and have a profit, the IRS taxes this as a short-term capital gain. You’ll pay at the ordinary income tax rate, which could be as high as 37% for the 2023 tax year.
Long-term capital gains: If you hold gold for over a year, you’ll pay less and the maximum tax rate is 28% for 2024.
20. Should I invest in gold mining stocks?
You might want to add mining stocks as part of your allocation but it’s not the same as owning precious metal. The reason is that owning stocks in a company means you have to rely on their performance for your investment. You’ll also be at the mercy of the overall stock market.
Owning physical gold gives you isolation from counterparty risk which means your asset doesn’t rely on anyone else for its performance.
21. How much of my portfolio should be in precious metals?
Generally experts recommend you hold about 5%-15% in your portfolio. Because gold is really an “insurance policy” and way to reduce your risks from recessions or chaos, you don’t want to hold too much since it’s not an asset that always gives you a high return.
22. How does inflation affect gold prices?
Gold usually goes up in price during times of inflation because investors see it as an asset that can protect their purchasing power. But, the connection between inflation and gold prices isn’t always a direct correlation so it’s not guaranteed.
Check out the chart below to see gold’s performance over the last 24 years compared to inflation:
23. What types of gold and silver coins are there?
The types you can buy include:
Bullion coins These are high gold content coins like American Gold Eagles, Canadian Gold Maple Leafs, and South African Krugerrands. You can find many of these brands in silver and platinum as well. Because of their purity, you can also hold these inside of your Gold or precious metals IRA.
Numismatic coins: These are collectible coins like pre-1933 U.S. gold coins or ancient Greek and Roman gold coins.
24. How are gold prices determined?
Supply and demand determine prices. Things that affect gold include:
Supply: A new supply of gold comes from mining, recycling, and central banks selling their gold.
Demand: The jewelry industry, investors, central banks, and industrial uses drive demand.
Other factors that increase gold prices
Higher inflation
Lower interest rates
Geopolitical conflict
Weaker U.S. dollar
You can check out the status of global supply and demand on the Gold.gov website:
25. What is the difference between spot price and retail price?
Spot price is the current market price. Retail is the final selling price, which includes costs like manufacturing, shipping, and distribution through dealers. The difference between the two is the premium.
26. How do central bank policies affect gold prices?
Central banks impact gold prices due to either their policies or buying/selling:
Policies: Decisions on interest rates and quantitative easing or tightening impact pricing.
Buying/selling: Central banks add gold to their reserves, which drives up prices, or they sell, which increases supply.
27. What are the most common mistakes when investing in gold and silver?
Here’s the most common mistakes we see:
Not researching the dealer before buying.
Failing to verify the authenticity and purity of the gold or silver.
Forgetting about storage and insurance costs when calculating potential returns.
Not being aware of the difference between numismatic and bullion.
Expecting short-term profits in what is a long-term investment.
29. Why do people stockpile gold?
People stockpile gold as a safety net. And, some people distrust financial systems, have concerns about cyber risks, and want privacy. Some of the comments in the r/Preppers subreddit include:
ponchomono:
“It sits low in my prep hierarchy but IS something I buy from time to time. In scenarios we’ve seen, like Venezuela, people were supposedly using gold shavings to pay for food and supplies after their currency crashed.”
formyburn101010:
“Precious metals have their place. They are the base of the monetary pyramid. They are the one true money. They will hold there purchasing power over long stretches of time. But if the power goes out, if the food supply breaks down, ect, PM can’t help you by themselves. Be well rounded”
30. Will gold ever lose it’s value?
No one can answer this for sure, but it’s unlikely to lose all of its value because it’s a scarce resource with industrial uses and investor demand.
31. Is 1oz of gold a good investment?
It can be, but you should look at gold as a way to reduce risks and protect your wealth. It may have a return, but the reason people usually buy gold is more like insurance for when things are in chaos.
32. How much gold is enough for retirement?
If you are thinking of buying gold for retirement, how much do you need? That’s really an impossible question to answer, as it depends on your circumstances and situation.
33. Is it better to buy gold coins or bars?
Coins and bars each have their advantages. Coins are a good investment choice and can be easier to sell because people recognize them. But, bars in various sizes may have a lower premium over the spot price. The kind of sizes you can expect for gold and silver include:
Coins
Smaller sizes include: 1/10 oz, 1/4 oz, 1/2 oz, and 1 oz
Larger sizes include: 2 oz, 5 oz, or 10 oz
Bars
Common sizes include 1 oz, 10 oz, 100 oz, and 1 kg (32.15 oz)
Silver bars also come in sizes up to 400 oz or 1000 oz
34. How can I open a Gold IRA?
The steps to convert your IRA to gold, set up a silver 401k or rollover any other plan like TSP or 403(b) are:
Find a custodian specializing in precious metals IRAs.
Decide on a precious metals dealer.
Open an account and fund it via rollover from your 401(k), existing IRA or contribution.
Direct the custodian to buy physical metals for your Gold IRA.
Store in an IRS-approved depository.
Manage your account as needed.
For more information, check out our Gold IRA rollovers guide or details on a Silver IRA.
35. What is the difference between a Gold IRA and a Silver IRA?
These terms all refer to an IRA that holds physical metals. It could contain gold, silver, platinum, or a combination of these. The industry often uses these names in the same way because they all refer to tax-advantaged retirement accounts. You might hear any of the following to refer to these self-directed IRA accounts that hold physical metals:
36. How does gold compare to other alternative assets?
You might be wondering how gold compares to other alternative assets like Bitcoin, real estate or Forex. None of these other investments give you the same combination of a tangible and simple asset that grows over time.
37. Is a Gold IRA better than a 401(k)?
One isn’t necessarily better than the other and many people have both. A 401(k) is an employer-sponsored plan that you invest in while you work for that employer. If you leave your employer, you can roll over this account into a self-directed IRA and invest in gold or other precious metals.
Then, if you work for a new employer, you can set up a new 401(k) through their plan administrator. This gives you both a Gold IRA and 401(k) at the same time.
38. Is a Traditional Gold IRA better than a Roth Gold IRA?
Both are great options for owning physical metals with your retirement savings. The choice of which one depends on your financial plans. Traditional Gold IRAs grow tax-deferred with the goal that you’ll be in a lower tax bracket when it comes time to pay taxes in retirement.
Roth Gold IRAs use after-tax contributions and grow tax-free. And, as long as you’ve held the account for five years, you can withdraw your proceeds tax-free in retirement.
39. Why does counterparty risk matter?
We often talk about how gold is in independent asset. It’s free from counterparty risk which means that you can completely control what you do with it and you don’t need anyone else to hold up their end of a contract. Why does it matter? Consider these scenarios:
If a bank fails, it doesn’t impact your gold.
If there’s a cyber attack, it doesn’t impact your gold.
If the government can’t pay its debt, it doesn’t impact your gold.
Gold questions – wrapping up
If you want to learn more about gold or other precious metals, connect with our team or request a free Gold IRA kit. You can also check out our weekly news articles or our podcast on YouTube.
Note: The information in this post is for informational purposes only and should not be considered tax or legal advice. Please consult with your own tax professionals before making any decisions or taking action based on this information.
