Ask any seasoned investor when the right time to buy an asset is, and you’ll probably often hear the answer “yesterday.” After all, a bird in the hand is worth two in the bush. And certainly, many investors today are wishing they had bought gold when it was $1,600 or $1,500, or even $1,200 an ounce a few years ago.
Now, more than ever, gold is playing an increasingly important role for investors. For years it has been considered a store of value that serves as a form of insurance against adverse economic events. When economic uncertainty lingers, investors tend to pile their funds into gold, which drives up its price due to increased demand and market interest.
In light of today’s high inflation, volatile stock market, and loose monetary policy, this could very well be the best time to buy gold.
Gold can be a hedge against inflation
Most of the anxiety investors have today centers around rising inflation. After an extended period of near zero interest rates, high levels of inflation are suddenly becoming a hot topic of concern as even small amounts of inflation increases can seriously erode an individual’s net worth and purchasing power over time.
The most recent Consumer Price Index inflation report showed that prices rose across the board last month. Overall, prices climbed 7% year-over-year, the largest increase in nearly four decades. The Bureau of Labor Statistics (BLS) cited big gains in food and used vehicle prices as the key drivers of higher inflation over the last month. Energy prices have cooled off since November, with total prices down 0.4% over the month—although the 12-month costs are still nearly 30% higher than the previous year.
Inflation leads to a rise in prices of many goods, and gold is no exception. Where gold excels, however, is that it has maintained its value against inflation over time. And the higher inflation rises, the higher the gold price normally rises, as investors flock to gold to protect the value of their retirement savings portfolio.
Recent stock market fluctuations put 401(k)s at risk
The latest Federal Reserve meeting points to an interest rate hike to combat rising inflation as soon as March and it appears Wall Street may be contemplating its impact considering the huge daily swings in stock market volatility. What will higher interest rates mean for markets over time? That remains to be seen but will most likely be a wild ride which may be unsettling for most retirees.
Low interest rates have been great for stocks. The market was on a tear even during the pandemic. During the lockdowns Americans had more money on hand as they were spending less in addition to cash received from stimulus payments. Many put their extra money into the markets directly and through 401(k) and IRA contributions.
However, amid recent mounting uncertainty, the markets are increasingly volatile. They have hit all-time highs on numerous occasions, while also seeing pretty significant corrections. The COVID-related crash in early 2020 saw markets falling around 35%, wiping out trillions of dollars of investor wealth nearly overnight.
That crash paled in comparison with the 2008 crisis, when markets lost an estimated 55% of value, but the next real crisis could be even bigger than 2008. This year’s COVID-related volatility was largely self-inflicted, the result of state government actions. The economic landscape is changing due to a variety of compounding factors and the next crisis will likely be the result of structural problems that have been brewing for over a decade. No amount of quantitative easing will be able to paper over its long-term effects. Retirees with 401(k) or IRA investments may be at risk and could lose out in a major way.
Investors have trusted physical gold and silver because its value has been so consistent over time. Even with market fluctuations, it hasn’t been subjected to the same seesaw effect as stock markets have been. Its price has been much less volatile. And over time, the gold price keeps pace with or even outperforms stock markets. Over the past 50 years, the average annualized gains for gold have exceeded those of the Dow Jones and the S&P 500.
The 2020’s could be a repeat of the 1970’s
Of course, not every economic crisis manifests itself as a full-blown panic. Take the 1970s, for instance, which witnessed incredible stagflation - rising prices, high unemployment, and stagnant economic growth. So how did investors manage? If they were able to invest in precious metals, they could have done pretty well for themselves.
If gold were to repeat that type of performance this decade, that could mean a gold price of $5,000 per ounce by the end of 2025. While even the most bullish gold investors couldn’t imagine a price that high so soon, the prospect for a $2,500 or $3,000 an ounce gold price by mid-decade does not seem so outlandish.
The 2020’s are certainly looking like they could be a repeat of the 1970’s. Inflation is climbing and companies throughout the country are dealing with shortages of parts, labor, and raw materials. If the 2020’s end up being another decade of stagnation, are your assets protected with some investment in physical gold and silver?
Protect your assets today
Whether you’re looking to protect your investments against a stock market crash, looking to maintain your wealth in the face of rising inflation, or trying to boost your portfolio’s future growth, physical gold and silver can play an important role. Now is the perfect time to purchase precious metals and you won’t want to miss this window of opportunity.
A precious metals IRA allows you to invest in physical gold or silver while still enjoying the same tax advantages as your current 401(k) or IRA accounts. And you can fund a precious metals IRA by rolling over or transferring assets from your existing 401(k), 403(b), TSP, IRA, or similar accounts into your gold IRA or silver IRA tax-free and penalty-free.
If you have cash or cash equivalent investments like money market accounts that you want to protect, you can also buy gold and silver directly. These metals can then be stored at a depository or storage location of your choice.
Take the first step towards safeguarding your financial future by calling the precious metals experts at Goldco. You can request a free Wealth Protection Kit and you may qualify for up to $15,000 in free silver.
Trevor Gerszt is the founder and CEO of Goldco, a precious metals dealer in Los Angeles. For more than 20 years, Trevor has sought out ways to help people build long-term wealth through the security and stability of precious metals and other alternative assets. Goldco is A+ Rated by the Better Business Bureau, a 5-Time INC 500 Winner and has countless 5-Star Reviews for its quality customer service, dependability and strong reputation.
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