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What's the Point of Investing in Gold: Why Bullion Belongs in Your Portfolio

 

May 20, 2024 (Investorideas.com Newswire)You may have a friend or family member who swears by bullion as an asset worth getting into. You may have heard about investing in gold on shows like CNBC's Mad Money, or you have may have read about the benefits of including it in your portfolio.

Credit: Infrarate.com via Unsplash

Whatever led you to consider bullion as an investment, the more you know, the better decisions you can make about your money. Before you start investing in gold or silver, you should understand the point of buying bullion and why it belongs in your portfolio.

#1 Long-Term Price Forecasts: What's a Reasonable Return?

Most investors who include bullion in their portfolio don't do it looking for quick returns. High short-term gains also tend to come with high risks. Investors who want quick trades and fast returns are drawn to activities like day trading or high-volatility assets like cryptocurrency or some types of stocks.

Bullion is a different type of asset. It's the kind of asset that the super-wealthy invest in for future generations. They use it to protect their wealth against inflation, financial crises, and political upheaval. Gold has been valuable since the earliest human civilizations. Even in a world dominated by fiat currency, people believe in the value of precious metals.

The long-term price forecasts for gold and silver are essential if you're thinking of becoming an investor. As a general rule, investors expect the precious metal to maintain its value against inflation, rising while the value of currency slowly erodes. However, there are also forecasts that show a significant surge in gold prices in the coming years, with the potential to reach $7,000 per ounce in 2030, according to some models.

#2 Liquidity: The Market for Selling Bullion

Some beginner investors have concerns about the liquidity of buying physical bullion, but they might be surprised by how well it compares to everyday assets like mutual funds.

Liquidity is an important quality to understand. An asset with liquidity is one that can be traded quickly without applying a discount to it. Liquidity requires a ready marketplace full of buyers, as well as a fungible asset.

Today, most cities have bullion dealers who readily buy and sell gold and silver. In Toronto, buyers like Muzeum provide on-site evaluations, and they post their rates publicly. There are no surprises when you go to sell your gold or silver to them.

The main delay in selling physical bullion is driving to the buyer. Keep in mind that when you want to draw money out of a mutual fund, it can take 1 or 2 days, depending on the time of day when you made that decision.

#3 Portfolio Diversification: Alternative Assets for Better Results

Diversification is the name of the game when it comes to bullion. As a general rule, only about 10% of your portfolio should go into bullion. Precious metals don't produce a yield, so you still want to include assets like bonds, dividend stocks, and high-growth stocks for the bulk of your investments.

Investors buy bullion because markets are cyclical, and there will always be periods when the stock market is in turmoil, interest rates plummet, and other assets lose money. Bullion is an alternative that tends to surge when other assets crash.


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