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MoneyWatch: Managing Your Money
By Aly Yale
Edited By Angelica Leicht
/ CBS News
With geopolitical tensions, economic uncertainty and inflation still sitting higher than it should be, many consumers feel wary about their finances.
For some, gold — long known as a safe-haven investment — could provide a solution.
Are you concerned about looming economic or geopolitical issues impacting your wealth? Here's how investing in gold in 2024 can help.
Explore your top gold investing options online here.
Why you should invest in gold in 2024
There are a few reasons why you may want to consider investing in gold in the new year, including:
It diversifies your portfolio to reduce risk
Putting all your eggs in one basket — at least investment-wise — is always risky. For example, if you're heavily invested in the stock market and the S&P 500 tumbles, so does your overall wealth. If you're big into real estate and another bubble bursts, you're out a significant amount of cash.
By putting gold in your portfolio — an asset that typically has an inverse relationship to most other types of investments — you can offset some of that risk and better protect your wealth.
"Gold's long-term correlation to other risky assets is lower than that of most other assets, making it a desirable portfolio diversifier," says Rohan Reddy, director of research at Global X ETFs. "It's proven itself time and time again to reduce overall risk."
Between Sept. 21, 1976, and March 6, 1978, the S&P 500 fell over 19%. Gold prices, though? They jumped nearly 54%, according to GoldSilver. A similar trend happened during the 2007-2009 recession. During that time, the S&P dropped almost 57%, while gold went up 25%.
Find out how gold investing could benefit your portfolio here.
It's a safe-haven play to protect against market uncertainty
Geopolitical conflicts lead to instability, and when that happens, investors and consumers tend to seek shelter — somewhere their money will be protected and hold its value despite what may happen politically. As a scarce asset, gold offers that safe haven option.
For proof, just look at recent gold prices since the Israel-Palestine conflict that started in early October. Starting October 8 — the day after the first attack — gold prices jumped from $1,809 to $1,983 per ounce, marking a 5% uptick in just a few weeks.
"There is increased geopolitical instability due to the Israeli-Palestinian conflict in the Middle East, which continues with no clear resolution in the short or long term," says Alex Ebkarian, co-founder of Allegiance Gold. "Due to this geopolitical instability, as well as other issues which continue around the world — the Ukraine War, U.S.-China trade tensions, etc. — investors will continue to turn to safe haven assets like gold in 2024."
It offers a hedge against continued inflation
Gold is also well-known as a smart hedge against inflation, allowing you to preserve wealth — even while paper currency loses its purchasing power. That's because it's scarce; you can't create more, so it can't be devalued by oversupply, as the dollar can.
As Reddy puts it, "Gold has a track record of holding its value, serving as a safe haven and potential hedge against inflation in times of economic instability."
While inflation has come down slightly since the Federal Reserve started increasing interest rates early last year, it still hovers at 3.7% — well above the Fed's 2% goal.
It safeguards your money in case of a downturn
You can also invest in gold as a protection against a possible recession. "There is a reason central banks use gold to hedge the wealth of their own country and billionaires use gold to hedge their billions," says Collin Plume, CEO of Noble Gold Investments. "If anyone knows money, it would be them."
In the event there's a financial crisis of some sort, gold assets can help there, too, Plume says.
"Gold has history on its side," he says. "On average, we go through a financial crisis every 5.5 years. In each of those crashes, gold goes up either during or directly after the crash. No other asset has done that."
It keeps you liquid
Finally, gold is an investment that keeps you liquid. It's always in demand, and you can buy or sell it at any time you need. This can be helpful should you have unexpected expenses, lose your job or otherwise fall on hard times. It can also prove to be a nice financial safety net in uncertain economic times.
How to invest in gold
There are many ways to buy gold. You can purchase physical bars or bullion, open a gold IRA or invest in gold ETFs, among other strategies. You can also purchase gold mining stocks or futures, depending on the level of risk you're willing to take.
If you do opt for physical gold, though, keep in mind: Buying higher quantities of gold — or buying bars instead of coins — may decrease your price per ounce, so be sure and explore several avenues before moving forward. You should also factor in the costs of transporting, storing, and insuring your investment as well.
