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In the post-pandemic era, the price of gold repeatedly hit new records, at one point topping $2,700 per ounce. Investors flocked to gold due to economic uncertainty as inflation surged and unrest overseas led to further economic concerns.
Today, the inflation rate is 2.7%, which is still above the Federal Reserve’s benchmark target of 2.00% and the labor market is slowing. Interest rates also remain high, even as the Fed slowly moves to drop rates from recent multi-decade highs.
With economic conditions still far from ideal and a number of unknowns on the horizon, it makes sense to try and protect your portfolio from losses. But in today’s economic climate, some gold investments could make more sense than others, experts say. Here’s what you may want to invest in now if you’re worried about the economy.
Find out how to add gold to your investment portfolio today.
How to invest in gold if you’re worried about the economy, according to experts
Here’s what experts recommend so you can decide which gold investing approach makes sense for your situation.
Buy physical gold
Purchasing physical gold is one option for those concerned with economic instability. Jose Gomez, a partner at Summit Metals, recommends it over paper-based alternatives because it’s a tangible investment.
“Simply put, if you can’t hold it, you don’t truly own it,” Gomez says.
While Gomez believes it is worth the effort, he warns that the safe storage of physical gold plus the costs of insuring it can add to the cost of ownership. However, “direct physical ownership remains the gold standard,” according to Gomez.
Here’s what you need to know about buying physical gold.
- Type of gold investment: Gold bullion in the form of bars or coins
- How to get invested in this type of gold investment: You can purchase gold from a government or private mint, precious metals dealer, or jeweler online or in person. You can also own physical gold in a gold IRA (just be sure to look for the best gold IRA companies).
- Why this type may be good if you’re worried about the economy: You get direct exposure to gold that is physically in your possession (or stored in a depository).
- Risks to be aware of: You may pay high transaction fees or dealer markups and you risk loss due to theft.
Start protecting your portfolio with the right gold assets now.
Buy gold ETFs or mutual funds
Buying gold ETFs or mutual funds is another alternative. Gold ETFs and mutual funds allow you to pool your money with other investors to buy a collection of assets — in this case, either physical gold, gold futures contracts, or gold companies.
“The most liquid way to invest in gold is through an ETF,” says Michael Martin, vice president of market strategy at TradingBlock.
- Type of gold investment: Shares of ETFs or mutual funds that provide exposure to gold
- How to get invested in this type of gold investment: You can purchase ETFs or mutual funds through a brokerage account.
- Why this type may be good if you’re worried about the economy: Buying gold ETFs or mutual funds is a more liquid way to invest in gold. It can also be simpler than buying gold bars or coins and having to store them.
- Risks to be aware of: Some funds have a relatively high expense ratio and gold ETFs and mutual funds are not always fully backed by physical gold.
Invest in gold streaming companies
Investing in gold streaming companies is another option — and it’s one recommended by Randy Smallwood, CEO of Wheaton Precious Metals.
Streaming companies provide mining companies with upfront cash. In return, the streaming company is promised the right to purchase gold at a reduced price in the future. Streaming companies avoid the risks of directly running a mine and can achieve diversification by investing in many mines at once, including those in different stages of development.
“I believe the streaming model presents the best investment vehicle to gaining exposure to precious metals, as streaming delivers all the benefits of a good mining investment, without the operating and capital cost risks associated with traditional mining,” Smallwood says.
- Type of gold investment: Companies that fund gold miners
- How to get invested in this type of gold investment: You can purchase shares of gold streaming companies.
- Why this type may be good if you’re worried about the economy: Investing in streaming companies can be less risky than investing in mines, but you can still benefit from the exploration process. Investments are relatively liquid if you choose a large publicly traded streaming company, and many streaming companies pay regular dividends.
- Risks to be aware of: Shareholder dilution can occur if streaming companies issue new shares when streaming deals fail to live up to expectations. If streaming companies get too deeply into debt, they may be limited in future mines they can invest in.
The bottom line
While the right gold investment can help to protect your portfolio amid economic uncertainty, there are pros and cons to each option. So, if you’re planning to take this route, it’s worth exploring these gold assets to determine which one makes the most sense for your investment strategy and your portfolio. By doing your homework and finding the right gold asset to invest in, you can ensure your portfolio is safe from whatever economic events may be on the horizon, both now and in the future.