Four Reasons to Invest in Gold for Retirement

[This is a guest post from Sharon Freeman. The article has not been modified except for some formatting changes to suit this blog.]

For people nearing retirement, investments may begin to take an even greater significance compared to other time of life. If you’re planning to rely on your investments as your income in your retirement, it’s a good idea to closely evaluate your investment strategy. Your retirement could be a good time to move a greater portion of your portfolio into more risk-averse areas. Many financial advisors would suggest that investing in precious metals is a sensible option for people nearing retirement age.

Physical gold has historically outperformed almost all other investment opportunities over the medium to long-term. Let’s look at some reasons why it is a good idea to include gold investments in your portfolio.

Reason No. 1 - Gold is a stabiliser

Gold helps to stabilise your investment portfolio. In the event that the value of the dollar or currency falls, the price of gold usually increases. Gold itself actually never changes in value but reflects the value of the currency in which it is quoted. This generally means that a drop in the value of the dollar inversely affects the price of gold. 

Reason No. 2 -  Control

Physical gold can be controlled by the investor themselves. Therefore, it  never disappears like money, which has been mistakenly invested in schemes like pyramid schemes.

Reason No. 3 -  A Hedge

Gold has historically been a good hedge against inflation. Again, this happens because its price tends to rise when the cost of living increases. So,  when the value of other investments falls like stocks and bonds, gold can be relied upon. Its value has remained constant over time in terms of the real goods and services it can buy. As well, gold doesn’t rely on a borrower’s promise to pay — as in the case of a bond. This offers some protection from the risk of default.

Reason No. 4 -  Reduction in Production

There has been a reduction in the production of gold since 2000. A decrease in production generally means an increase in price. The price of gold is determined by demand and supply. Since the demand for gold has grown for jewellery, investments, and some industrial uses, there has not been much of an increase in supply and leads to an increase in its value. Another factor in increasing its value is time. It takes many years for gold to be transformed from the state it’s found in mines into bullion bars or coins. Bars and coins contain more concentrated gold and it also induces higher value, which will be likely to be maintained for some time yet. 

Quite simply, gold (and many other precious metals) is an investment unlike many others.  It is hidden underground. It has to undergo extremely difficult and time consuming process. Mining gold and other precious metals from their sources plus the processes involved would mean that there won’t be an oversupply anytime soon.  As an investment, gold would be a good addition. All portfolios should have some diversity in them and gold can provide a great ‘balancing’ investment for almost any investor.  Gold should be an important part of a diversified investment portfolio. Although its price can be volatile in the short term, its long-term benefits like a hedge against inflation and as an asset that does well is clear.