The theme of this year’s National Coin Week is “Money, Big and Bold.” The annual event, now in its 98th year, provides a great time to discuss the basics of precious metals. Here, U.S. Money Reserve discusses several reasons to diversify with gold, how gold compares to other popular asset classes, and what you can do today to begin adding gold to your portfolio.
Gold in 2020
Gold hit historic highs in 2020, reaching over $2,070/oz. in early August. By comparison, the price of gold was approximately $1,500/oz. at the end of 2019, and it was approximately $590/oz. 40 years ago at the end of 1980. Gold’s ascent in 2020 was, in large part, driven by increased demand for a safe-haven asset in response to rising economic uncertainty. The ongoing volatility pertaining to the global recession also played a role in the rise of gold prices last year.
Diversifying with Gold
Diversification is a good way to help reduce the risk level of any portfolio, and diversifying with gold has important benefits buyers look for:
- Gold tends to be less affected by changes in interest rates than many other asset classes. Instead of being dragged down by low interest rates, gold can continue to have upside potential even when interest rates are down.
- Gold can act as a hedge against inflation. Government stimulus programs and other fiscal injections that increase the money supply could reduce the buying power of cash. But since these programs do not directly affect the supply of gold in the market, gold may help stabilize your portfolio during times of inflation.
- Gold is a tangible asset, which makes it an attractive option for those who want to include something they can physically hold and touch in their portfolios.
- Gold has no counterparty risk— there’s no risk of nonpayment, default, or bankruptcy due to someone else’s failure to perform. Gold is also portable, and it can be kept private and confidential.
- Gold is a liquid asset. This means it can be easily traded and used to pay for goods and services, it is portable, and it can be kept private and confidential.
- Gold does not require any specialized knowledge to acquire, nor does it require an understanding of complex securities, stocks, or fiscal issues.
- Gold comes with a deep and liquid market that makes buying and selling easy.
These are clear benefits of holding gold in your portfolio, but what about other asset classes, such as Bitcoin or gold ETFs?
Gold vs. Bitcoin vs. ETFs
The price of Bitcoin skyrocketed from roughly $5,000 per Bitcoin about a year ago to about $54,000 per token—and, like gold, it is often seen as a portfolio diversifier in the digital age. However, you cannot physically handle Bitcoin, and Bitcoin does not have gold’s historical track record of being used as a medium of exchange.
As for gold ETFs—which involve purchasing stocks or baskets of other assets that are tied to gold—many of the same issues exist. You cannot physically touch your gold ETF stocks, and stock trades come with some level of counterparty risk. And as with Bitcoin, stock trading typically comes with certain risks and volatility.
If you want to learn more about other popular asset classes such as stocks, bonds, real estate, or IRAs, you can read about the pros and cons of each—and the benefits of owning gold—in U.S. Money Reserve’s Gold 101 Special Report.
There are many ways to buy gold. You can purchase gold bars and coins, vaulted gold, gold-backed securities such as gold ETFs, or gold-mining stocks or funds that are not backed by gold. You can also purchase other gold-related products such as gold certificates, gold accounts, and gold trusts.
Some considerations to keep in mind when purchasing gold:
- Cost: The costs associated with buying, holding, and selling gold depend on the specific asset category that you have in mind. Costs may include purchasing costs, administrative costs, and safekeeping costs.
- Risk: Regardless of which assets or holdings you have, some inherent risks are usually involved. A change in the price of gold, economic factors, and changes in interest rates could all impact gold-related assets.
About U.S. Money Reserve
U.S. Money Reserve has been in business for more than 20 years and has served more than 550,000 clients. With U.S. Money Reserve, you can buy precious metals with confidence. U.S. Money Reserve is one of the country’s largest distributors of government-issued coins and strives to provide clients with the highest level of service and the most exceptional gold, silver, platinum, and palladium products on the market.
Whether you are interested in gold, silver, platinum, or other precious metals or simply want to know more about acquiring these and related products, contact U.S. Money Reserve at 1-866-646-8465 to speak with an Account Executive who can help you make the right decisions based on your unique goals and circumstances.