Including precious metals, especially gold, in an investment portfolio is one of the best strategies to ensure your assets are diversified. As with all types of investments, the value of gold can increase, and it may go through periods when the worth holds
steady or decreases.
It’s no secret that gold enjoyed a steady uptick in value between August 2018 and August 2020. Since that time, it’s been in what some experts call a consolidation period. Does that mean investing in gold right now is not the best idea? Depending on your
long-term plans, buying gold assets might be precisely what you want to do. Here’s some background about what’s happening with gold and why it’s worth considering.
Status of Gold in Today’s Market
During the two years ending in August 2020, the price of gold per ounce increased consistently. Gold reached a value of USD 2,000 per ounce during that month. The trend reversed during 2021, and the value per ounce dropped. This led some to determine that now
is not the time to pursue gold as an investment.
It's important to realize where things stand today before making assumptions about how much of a change has occurred. As of the end of the third quarter for 2021, gold averaged a value of $1,800 per ounce. While that does constitute a drop, the fact that gold
remains a viable asset means it is worth including as part of your offshore investments.
Anticipated Gold Performance in the Short Term
The overall performance of gold in the short term may not lead to spectacular gains. Due to short-term inflation and some unrest about investments in general, some investors will decide to step back and see how the market for precious metals moves in the coming
It’s important to remember that almost any asset is affected by what’s happening in the economy and the market in particular. While gold, or other investment options, may not provide immediate returns in the current market climate, look at projections for the
next five to ten years, and you can see how gold is a good choice. In other words, buying the gold now and waiting things out could allow you to enjoy more significant rewards later.
Gold’s Historical Performance
Why do experts think that gold will eventually move out of this consolidation phase and again gain in value? The answer is historical performance. While periods of economic uncertainty can impact gold prices just as they impact other types of investments, gold
has shown that it regains lost ground over time.
Consider gold’s performance since 2001. During that time, the demand for gold increased worldwide by 15% on average. There have been ups and downs, but the overall movement of gold remains upward.
While the current world situation does have the unique element of emerging from a pandemic, most other factors that may influence the worth of assets are like circumstances found in the last several decades. This means reviewing the historical performance from
at least the middle of the 20th century can provide insight into what is likely to happen with gold in the next decade. Based on what you think of that history, buying gold now could be perfect for you.
Purchase Gold While the Price Per Ounce is Lower
Why buy now? The price of gold per ounce is lower than it’s been in some time. How long this will last depends on whose projections turn out to be the most accurate. No matter how those projections play out, there’s a good chance that you would not be able
to buy gold for the same price this time next year as you can today.
Buying now allows you to get into the market while the price is deflated. You’ll position yourself for the time when the value of gold surpasses today’s price and generates returns.
Make Gold Part of Your Long-Range Investment Planning
Some of the investments that you make are intended to generate returns quickly. You may hold certain stocks for a few months and then sell them off just as they peak. That allows you to earn returns quickly and then move on to the next big thing.
Part of your portfolio is also composed of assets you plan on buying and holding for years. These may not offer the highest returns, but they are consistent and involve little volatility. These are the foundation for your portfolio, helping to provide stability.
You also make some investments when they are not the most popular, with the intent to keep them at least as long as it takes for the price to begin rising again. How long you keep those assets after the increase starts is up to you; it may be weeks, months,
The latter is where you are with gold right now. It’s possible to invest in gold while the price is lower and hold those investments for a time. When gold does begin to increase in value again, you can decide whether to keep it a little longer, sell it, or
consider it to be a permanent part of your portfolio.
Examine Gold Investment Types
As you ponder why investing in gold right now makes sense, think about the different forms that investment can take. Gold jewelry is one option. In general, it’s considered a low-risk approach that allows you to enjoy increases in value as the years pass.
You may also consider the idea of gold futures. You would agree to buy futures for a price that’s fixed right now, with the purchase to be completed on a specified date. If you lock in a low price now and the cost of gold increases above and beyond that amount
by the date specified, you stand to enjoy a return on your investment.
Another approach to consider is entering into a gold loan program provided by an offshore bank. In this scenario, you buy gold that the bank ensures is stored in a secure setting. The bank then extends a line of credit amounting to a fixed percentage of the
gold’s worth. Assuming the value of the gold increases, you may be eligible for an increased credit line. This is a way to hold assets, enjoy returns, and use the asset to provide you with a credit line that can be used for any purpose you desire.
Decide if Buying Gold Now is Right for You
Ultimately, you are the one who has to decide if adding gold investments to the portfolio is what you want to do. If you can afford to wait for a year or two, the return could be excellent.
Keep in mind that while the price of gold in 2021 is not what it was in the two years prior, it’s still a solid investment that’s likely to provide stability for the long term. If your intent for the portfolio is to provide a comfortable flow of resources during
your retirement years, gold is worth your consideration.
Luigi Wewege is the Senior Vice President, and Head of Private Banking of Caye International Bank headquartered in Belize. Outside of the bank he serves as an Instructor at the FinTech School in California which provides online training courses on the latest
technological and innovation developments within the financial services industry as well as sits on the Advisory Board of Fort Kobbe a Panama based custom-built offshore vaulting and safe deposit box facility. Luigi is also the published author of: The Digital
Banking Revolution, which is available in audio, kindle and paperback formats throughout all major international online bookstores – now in its third edition.