Is Gold a Good Investment?

Gold is sometimes referred to as “The currency of fear” because it is often sold in late-night infomercials touted as a hedge against a future where your dollars or other investments are worthless. The truth is, while these “gold bugs” may tout gold as being a “safe” investment, historically gold has actually been quite volatile- sometimes fluctuating wildly within short periods of time. It has also been known to languish for long periods of time. That’s what makes this question difficult to answer; who knows what’s going to happen next?

Gold is a commodity whose value tends to surge when the economy is in a shaky spot. We saw this between 1978 and 1980 when the average price of gold surged from $193.40 to a peak of $850 per ounce in 1980. But after that, the Feds raised interest rates to curb inflation, and the price barely moved for two decades. It took 28 years, until 2008, for the price of gold to creep over $850 per ounce again. Then during the Great Recession of 2008, gold had a run again until September 2011, when it hit a high of $1921 per ounce. It dropped again for the next four years straight but has recently seen a slight uptick in value amidst the volatility experienced in the stock markets in the first part of 2016.

But looking at the current value of gold isn’t the best way to decide whether it has a place in your portfolio. Instead, you have to consider your personal timeline, objectives, risk tolerance, and tax bracket, to decide whether it’s the right commodity for you.

It is important to keep in mind that gold does not produce anything. It does not produce earnings or dividends or income of any kind. So if your objective is income, gold might not be the right investment for you. Even if you do end up making a profit off of it, gold is taxed as a collectible and not an investment. Capital gains on collectibles are taxed at 28% for long term and 35% for short term, rather than the 15% long term capital gains rates that most investors experience on other types of investments such as stocks and bonds.

At Kramer Wealth Managers, we look at all the various components of a portfolio when we’re helping you to design your WealthPath. We consider your timeline, your risk tolerance, the current market, and your personal retirement goals. Then, we help you develop the right mix of assets to realize your goals and prepare for the unexpected. Contact us today to schedule a meeting to discuss which kind of investments might be a good fit for your WealthPath.

Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss.