Jamie Spencer
Gold is having a stellar year in 2024, hitting a record high of $2,748.23 per ounce and surging over 30% as economic uncertainty and geopolitical tensions continue to grip markets. Central banks in countries like China, India, and Turkey have turned to gold as they lessen their reliance on the U.S. dollar, boosting the metal’s appeal. Even retail giants like Costco are jumping on board, making it easier than ever for individual investors to buy gold. But with gold’s glittering appeal come important considerations for those new to this precious metal market.
Why Gold Appeals During Uncertain Times
Gold has long been a “safe-haven” asset, attracting investors during times of economic instability. When stock markets falter or geopolitical risks rise, gold often holds its value better than other assets. “Gold does well in moments of risk. If you look at market drawdowns or systemic events in the market, that’s when gold really shines,” said Joseph Cavatoni, senior market strategist for the World Gold Council. Between 2008 and 2012, gold prices surged alongside rising economic concerns, gaining over 100% according to the Bureau of Labor Statistics.
As inflation fears and economic volatility increase, many investors see gold as a hedge against the uncertainty surrounding the Federal Reserve’s interest rate changes and the upcoming U.S. presidential election.
How to Buy Gold: Physical vs. Gold-Backed ETFs
For those new to gold, the first step is to determine your objective: Are you investing in gold for portfolio diversification, or as a secure asset in volatile times? Cavatoni suggests that understanding your purpose is key to selecting the right investment method.
Gold investors have two main options: buying physical gold or investing in gold-backed exchange-traded funds (ETFs). Physical gold, whether in the form of bars, coins, or jewelry, requires secure storage and comes with additional considerations such as purity and resale options. On the other hand, gold-backed ETFs allow investors to enter and exit the market like stocks, often commission-free. “It’s just like buying a stock,” said Cavatoni. “You can do that commission-free on a lot of the platforms these days, so it’s very cheap to get in and out.”
Practical Tips for Buying Physical Gold
When buying physical gold, it’s essential to understand the difference between the “spot price” and the retail price. The spot price is the current market rate, but additional premiums on bullion can make retail prices higher. Cavatoni warns, “You need to make sure that you’re comfortable with that price level — that you’re buying the investment that you want and not being offered something that might be a little bit more collectible.”
Furthermore, finding a trustworthy source is critical. Reputable banks, brick-and-mortar retailers, and online stores offer a range of gold options. For those investing in physical gold, Cavatoni advises having a “round-trip mentality,” meaning investors should have a plan for both purchasing and eventually selling their gold. “When it comes time to holding it for as long as you’d like and selling it, make sure you have a trusted partner that you can go back to and make that sale,” he added.
Gold-Backed ETFs: Convenience Without the Storage
For those who prefer to avoid the complexities of physical gold, gold-backed ETFs provide a straightforward alternative. Without needing to worry about storage or purity, investors can buy shares that track the price of gold, making entry into the gold market more accessible. ETFs provide flexibility and the convenience of trading like stocks, which can be especially appealing for those not interested in managing physical assets.
Caution for New Investors: Due Diligence Is Key
While gold may appear to be a stable investment, Cavatoni urges investors to proceed carefully. “If something sounds too good to be true, then it might be not true. Make sure you’re careful before you make the investment,” he advised, stressing that it’s better to move thoughtfully rather than rush into buying. Gold’s current appeal has attracted many new investors, but with its price fluctuations and associated costs, due diligence is crucial to making informed decisions.
As gold prices surge in 2024, fueled by economic uncertainties and shifts in global policies, many investors are drawn to this traditional safe-haven asset. Whether through physical bullion or gold-backed ETFs, there are plenty of ways to invest in gold, each with its own benefits and challenges. Understanding the dynamics of the gold market and proceeding with caution can help investors harness the potential of gold as a hedge while avoiding common pitfalls. With global instability showing no signs of easing, gold’s allure remains as strong as ever—just remember that, like all investments, it requires careful planning and consideration.
