Gold has been used as a store of value and a form of currency for centuries. The shiny yellow metal has been sought after by kings and emperors, and it’s still considered a valuable asset by investors today. Below, the precious metals experts from First National Bullion, Carlsbad collectors’ premier choice for exceptional quality and service, explore the role of gold bullion and gold coins in modern investment portfolios.
Gold as a Safe Haven Asset
Gold has long been considered a safe haven asset. When markets are volatile or there is political uncertainty, investors tend to flock to gold. This is because gold has a long history of retaining its value in times of economic and geopolitical stress. During the 2008 financial crisis, for example, the price of gold surged as investors sought a safe haven from the chaos in the stock market.
Gold is also seen as a hedge against inflation. When the value of paper currency declines due to inflation, the value of gold tends to rise. This is because gold is a finite resource, and as the supply of paper currency increases, the value of each unit of currency decreases.
Diversification Benefits of Gold
Another reason gold is often included in investment portfolios is its diversification benefits. Gold has a low correlation to other asset classes, meaning it tends to move independently of stocks, bonds, and real estate. By adding gold to their portfolios, investors can potentially reduce their overall risk.
This is because gold can act as a buffer against market downturns. When stocks and bonds are performing poorly, gold may still be holding its value or even increasing in price. This can offset losses in other parts of the portfolio.
Gold Bullion vs. Gold Coins
There are two primary forms of physical gold investors can choose from: gold bullion and gold coins. Gold bullion refers to gold bars or ingots that are typically 99.5 percent pure or higher. These bars come in a variety of sizes, ranging from a few grams to several kilograms. The price of gold bullion is primarily based on the current spot price of gold and the premium the seller charges. The premium typically reflects the cost of manufacturing the bar as well as the seller’s profit margin.
Gold coins, on the other hand, are generally less pure than gold bullion, typically containing 90–95 percent gold. Gold coins come in a variety of sizes and denominations, and they often feature designs or images on one or both sides. The price of a gold coin is based on the current spot price of gold as well as the rarity and condition of the coin.
Both gold bullion and gold coins can be purchased from a variety of sources, including bullion dealers, banks, and online retailers. When purchasing physical gold, it’s important to be aware of the associated costs, such as storage fees and insurance.
Gold ETFs & Mutual Funds
In addition to physical gold, investors can also gain exposure to gold through exchange-traded funds (ETFs) and mutual funds. These funds hold portfolios of gold bullion or gold futures contracts, allowing investors to gain exposure to gold without actually owning the physical metal.
Gold ETFs and mutual funds can offer several advantages over physical gold. For one, they’re generally more liquid, meaning they can be bought and sold more easily. They also typically have lower associated costs, as investors don’t need to pay for storage or insurance.
However, gold ETFs and mutual funds do come with their own risks and disadvantages. For one, they don’t offer the same level of security as physical gold. In addition, their performance may be affected by factors such as management fees, tracking errors, and counterparty risks.
Gold has a long history of being a valuable asset, and it continues to play an important role in modern investment portfolios. If you’re building your portfolio and looking for the best place to purchase Carlsbad gold and bullion, reach out to the trustworthy professionals at First National Bullion. We can answer all your questions and help you find all the information you need on how gold can figure into your investment planning decisions. Give one of our experienced dealers a call today at (760) 253-8072.
The statements made in this blog are opinions, and past performance is not indicative of future returns. Precious metals, like all investments, carry risk. Precious metals and coins may appreciate, depreciate, or stay the same in cash value depending on a variety of factors. First National Bullion does not guarantee, and its website and employees make no representation, that any metals for sale will appreciate sufficiently to earn the customers a profit. The decision to buy, sell, or borrow precious metals and which precious metals to purchase, borrow, or sell are made at the customer’s sole discretion.