Gold prices are in another fresh record this week as more investors piled up into metal amid economic uncertainty and rising bets for the Federal Reserve rate cuts.
So far, as of the end of Friday, bullion has earned around 35%. Spot Gold is currently close to $3,600 a ounce.
“Undoubtedly, gold is getting higher and has attracted a lot of attention from investors,” said Blair Duquesnay, a chartered financial analyst and certified financial planner who is also an investment advisor at Ritholtz Wealth Management.
Investors see gold as protecting it from a “bad economy,” according to a study by the Federal Reserve Bank of Chicago. As a safe investment, gold tends to function well in low interest rate environments and periods of political and financial uncertainty.
“Gold checks all of these boxes,” said Samir Samana, head of global equity and real assets at Wells Fargo Institute.
According to the latest investment strategy report from the Wells Fargo Investment Institute, analysts “expect the ongoing gold purchases by the global central bank and the geopolitical battle to support growth in demand for precious metals.”
“Tax efficiency and low cost methods” to invest in gold
To invest in precious metals, investors can purchase physical gold or gold-related financial investments.
Most experts recommend that you acquire investment exposure in gold through funds traded on exchanges tracking the price of physical gold, rather than buying real gold coins or bars, as part of a well-diversified portfolio.
“In an age of acute stress, gold stocks are low performance, so as long as people want exposure, gold bullion support ETFs do better work than gold-related stocks and gold miner stocks,” Samana said.
According to ETF.com, SPDR Gold Strains (GLD) and Ishares Gold Trust (IAU) are the two largest gold ETFs.
“Gold ETFs will be the most fluid, tax-efficient and low-cost way to invest in gold,” Duquesnay said.
According to Duquesnay, “owning physical gold is much more inefficient,” mainly because of the high transaction costs and considerations regarding bullion storage, including bars and coins.
Alternatively, gold mining inventory is not closely related to the underlying price of gold, but is tied to the business foundation, she added.
Despite Gold’s record-breaking execution, financial advisors generally recommend limiting gold exposure to less than 3% of the entire portfolio.
Duquesnay, a member of the CNBC Financial Advisor Council, said that due to the whimsical nature of trendy investments, the portfolio he manages for his clients is lacking money.
“Are we in three innings of this rally of nine innings? Gold is priced as a product, which can make it difficult to identify the basics,” she said.
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