Should You Invest in Gold?
You should invest in gold if you’re looking to hedge against risk or diversify your portfolio. Gold is not your first choice to earn long-term appreciation.
Over the past five years, the price of gold has appreciated approximately 36% while the total return of the S&P 500 has been 60%.
Gold prices can be extremely volatile, and that means that gold isn’t an entirely stable investment. In fact, you can easily craft a well-diversified investment portfolio entirely without gold.
Studies have found that gold may be an effective inflation hedge, but only over extremely long periods of time, measured in decades or centuries.
Over shorter time periods, the inflation-adjusted price of gold fluctuates dramatically, making it a poor near-term hedge for inflation.
Many investors consider gold to be the ultimate safe-haven asset. When the prices of stocks, bonds and real estate drop sharply, gold may hold its value—and can even appreciate as nervous investors rush in to buy.
Owning gold is also a way to add diversification to your investment portfolio. When you hold a diversified mix of different assets, including gold, varying returns can protect the value of your investments.
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