As of this writing, gold prices are 50% higher than they were a year ago. Jamie Dimon, CEO of J.P. Morgan Chase, stated recently that gold could “easily go to $5,000 or $10,000 in environments like this.”
So why is it good to invest in gold? Why does it seem like everyone is adding it to their portfolios?
This article covers reasons to look at gold investing, what some of the drawbacks are, and how to get started owning gold today.
Introduction to gold investing
There are several ways you can invest in gold, including:
- Physical gold: Owning the real, tangible asset.
- Gold mining stocks: Own stock in companies that mine gold.
- Gold ETFs: Shares in funds that own gold.
- Gold mutual funds: Investing in funds that hold several gold-related investments.
- Gold futures: Betting on gold prices at a future date.
But the best way to own gold is when you buy the actual physical asset. No other investment gives you all of the key reasons to invest in gold in the first place.
| Investment type | Description |
| Physical gold | Owning the real, tangible asset. |
| Gold mining stocks | Owning stock in companies that mine gold. |
| Gold ETFs | Shares in funds that own gold. |
| Gold mutual funds | Funds that hold several gold-related investments. |
| Gold futures | Contracts betting on gold prices at a future date. |
9 reasons to invest in gold
Let’s get right into the nine reasons why owning gold is a good strategy:
Diversification
Gold is a completely separate investment from all other major asset classes. It often shows a negative correlation to the stock market, real estate, bitcoin, and any other asset classes you can think of.
Ever since President Nixon ended the tie between the US dollar and gold, it’s moved on its own and has value separate from what’s happening in those other markets.
That’s exactly why it’s one of the best ways to diversify your portfolio risk. It’s also why your financial advisor may recommend you hold between 5-20% of your portfolio investments like gold bullion.
Inflation
Many investors associate owning gold coins or bars with a defense strategy against inflation. The difference between owning physical gold and fiat currencies is that we can’t just make more gold. Governments keep adding to the paper money supply, which ends up making everything cost more and your money buys less.
If we look at the past five years, inflation has increased prices by over 25%. Meanwhile, as of this writing, the price of gold is 93% higher for the same time period. So if you owned physical gold during this time, you definitely would have beaten inflation with your investment.
Store of value
Gold has a limited and finite supply, making it a stable store of value for thousands of years. That’s why it can keep its purchasing power over long periods of time. It’s not subject to the whims of dollars or government policies.
It’s a real, tangible asset investors use to protect their wealth, no matter what’s happening to the economy or the value of paper currency.
Safe haven
Gold buyers tend to add gold or other precious metals when they’re worried. It could be about stock market volatility, it could be global wars, or it could even be the declining US dollar. In any case, much of gold demand comes from this desire to invest in a safer asset.
In fact, the declining US dollar is why the World Gold Council reports that many countries have increased their gold reserves during the past few years.
Tangible asset
Physical precious metals like gold are tangible assets that you can touch and hold. They have real, measurable value that exists outside of the financial system. Unlike fiat currencies or digital assets, gold doesn’t depend on electricity, servers, or an app to prove it is worth something.
Gold bullion exists in your hand, not on a screen.
That gives people a sense of built-in security and stability, knowing the value can’t be erased by a market crash, cyberattack, or currency collapse.
No counterparty risk
Gold holds its value on its own. When you buy physical bullion, you’re not depending on anyone’s promise or performance to keep it valuable. Stocks need companies to stay profitable, bonds depend on someone paying you back, and even cash depends on government stability.
Gold doesn’t.
It has no balance sheet, debt, default, or bankruptcy risk. Its worth isn’t tied to a CEO’s decisions, interest rates, or political outcomes. That independence is what makes it a cornerstone for investors who want part of their wealth outside the financial system.
Liquidity
Gold is one of the most liquid assets in the world. You can sell it almost anywhere, at any time, and still get fair market value. There is always demand from investors, jewelers, and global central banks, which keeps the gold market active and prices easy to track.
If you need to, you can quickly convert gold bullion to cash through a reputable dealer or exchange.
Global demand
People everywhere buy and value gold. Every country sees it as a store of wealth, so demand stays strong no matter what’s happening in the markets. Central banks keep adding it to their reserves, investors use it to protect savings, and gold jewelry buyers in countries like India and China help keep demand steady year after year.
That worldwide interest gives gold lasting strength and makes it easy to trade or sell almost anywhere you go.
Resilience
Gold has proven itself time and time again. It’s held its value through wars, recessions, and market crashes. When confidence in paper assets fades, people always come back to gold.
Prices move up and down, but over time it keeps its strength. That’s why so many investors see it as something they can count on when everything else feels uncertain.
Drawbacks to investing in gold
Just like any investment, there are drawbacks to gold investing to consider, such as:
Price volatility
Gold prices can move up or down quickly depending on what’s happening in the economy. When inflation rises or markets get shaky, prices usually go up. But when things calm down, investors sell, and prices can dip. It’s part of the normal cycle.
Gold isn’t meant for quick gains. It works best as a long-term way to protect your wealth, not something you trade in and out of.
No income
Investment gold doesn’t generate income or yield. It doesn’t pay dividends, interest, or rent. Its value depends entirely on market demand and price movement. That means you hold it for preservation, not for growth through cash flow.
You’ll need to consider the opportunity cost of buying physical gold versus another investment that produces income.
Storage costs
Owning physical gold means you need a safe place to keep it. If you store it at home, you’ll need a secure safe and insurance coverage. If you use a depository or bank vault, you’ll pay annual storage fees.
These costs can vary depending on how much physical gold you own and the level of protection you want. Storage expenses can add up, so you’ll want to factor them into your overall investment plan.
Transaction fees
When buying gold, you’ll pay a premium or a spread. The premium covers costs like refining, minting, shipping, and the dealer’s markup. It’s why the price you pay is always higher than the spot price.
When you sell, you’ll see the opposite side of that equation. The dealer’s buyback price is usually lower than spot. The difference between those two numbers is your transaction cost.
Capital gains taxes
When you sell physical gold for more than you paid, the IRS treats that profit as a capital gain. Gold and other precious metals fall under the collectibles tax rate, which can be as high as 28%.
The exact amount depends on how long you held the gold and your overall income. If you have physical gold inside a Gold IRA retirement account, you can defer those taxes until you take distributions.
What drives gold prices?
Gold prices move based on how people feel about the economy. When inflation stays high or the dollar weakens, investors start looking for safety, and when the price of gold rises. If the Fed signals rate cuts, that increases prices even more because it means the cost of holding gold drops.
Gold also has a limited supply. Gold mining doesn’t increase much year to year, and new discoveries are rare. Meanwhile, demand keeps building from central banks, who’ve been buying record amounts to move away from the U.S. dollar.
And sometimes it just comes down to what’s happening in the world. Trade tensions, elections, or another round of debt worries all drive investors to gold. You see it every cycle. When people stop trusting the system, gold is where they go.
How to invest in physical gold
Here are the steps to get started with investment gold:
Choose a gold dealer
First, find a reputable dealer. Look for a company that’s been in business for decades, has strong customer reviews, and provides transparent pricing. The best dealers focus on education and resources to help you understand options and get started with the right bullion products.
Buy gold bullion products
Work with your dealer to decide what kind of gold you want to own. Investment bullion includes coins or bars. Coins are easier to sell in smaller amounts. Bars work better if you plan to buy larger quantities at once. Both have the same purity standards if they come from approved mints or refiners.
Some of the most popular gold coins and bars include:
Gold coins
- American Gold Eagle
- American Gold Buffalo
- Canadian Gold Maple Leaf
- Austrian Gold Philharmonic
- Australian Gold Kangaroo
Gold bars
- PAMP Suisse
- Credit Suisse
- Valcambi
- Perth Mint
- Royal Canadian Mint
Store your gold
Once you buy your gold, decide on how you want to store it. Also, keep your receipt records and assay certificates. These prove authenticity and make it easier if you decide to sell or pass it on later.
Monitor your investment
Gold isn’t the type of asset where you have to watch it constantly and worry about what’s happening in the market. But, it is a good idea to check the value of your investment and rebalance your portfolio if you’re trying to stick to a certain allocation.
How much to invest in gold?
Let’s say you want to start buying physical gold. How much should you buy? The answer depends on your overall goals and investment portfolio. Here’s how you can allocate percentages and gain exposure to gold:
- 5–10% rule: Basically, put a small amount of your portfolio into gold. Some might go higher, like around 15–17%.
- 1/3 rule: This rule recommends dividing your metals into roughly one-third gold and the rest between silver, platinum, or other metals.
- Ray Dalio’s all-weather portfolio: This strategy includes about 7.5% gold in a balanced mix of stocks, bonds, and other commodities.
- Central bank approach: Countries’ treasuries keep 10–20% of their reserves in gold to hedge against inflation, currency changes, and market uncertainty.
If you’re just starting out, you might begin with a smaller amount, around 2–5%, and build from there. You want to hold enough gold to make an impact, but not so much that it limits your flexibility or growth.
Should you invest in physical gold?
The question for anyone looking to invest in the precious metals market is if you want to diversify your assets. Do you need a way to protect your wealth in case something happens to your other investments? That’s where investment gold or other metals come in.
If you want to learn more about how gold and other precious metals can fit into your portfolio, connect with the Swiss America team today. We’ll help you understand your options and find what makes the most sense for your goals.
Why is it good to invest in gold? FAQs
Why is investing in gold the best?
Gold is more popular than other precious metals because it holds value over time, is easy to buy and sell anywhere in the world, and has a long history of being trusted as real money.
It’s also more stable and widely recognized than metals like silver or platinum, which makes it the first choice for most investors.
Is getting gold a good investment?
Yes, gold can be a good investment, especially if you’re looking to protect your wealth rather than chase quick returns. It’s a way to hold something real that keeps value through inflation, market swings, and currency changes. Most investors use gold as part of a balanced portfolio to reduce risk and add stability over the long term.
Why is Warren Buffett against gold?
Warren Buffett has never been a big fan of gold because it doesn’t produce income or generate cash flow. He prefers investments like businesses or stocks that create value over time through earnings or dividends.
That said, even Buffett has invested in gold indirectly. In 2020, Berkshire Hathaway bought shares of a gold mining company. This shows that he still sees gold’s value in certain market conditions.
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.
