Ways To Diversify And Hedge Portfolios, Regardless Of Economic Climate

Investing in physical precious metals can be an excellent strategy to diversify your portfolio. Regardless of the economic climate, gold has historically been considered a store of value and a means to ensure that a section of your portfolio is geared towards protection even during times of economic turmoil. Many financial experts suggest allocating between 5% to 10% of a portfolio to gold and silver and during times of crisis, increasing it to even 15%.

One of the key advantages of physical gold is that it can act as a hedge against inflation and general crises. A study by Echaust and Just shows that this feature was most evident during the global financial crises and, more recently, in the Covid-19 pandemic, when gold was shown to “significantly reduce downside risk.” The same study also showed that gold can serve as a counterweight to stocks during these times. During the Great Recession in 2008, when the subprime mortgage crisis began, gold, which had previously traded in the $400-600 range, skyrocketed to $1,000 per ounce and continued to rise for the following three years. 

In times of uncertainty or socio-political turmoil, gold has historically held its value or performed well. For instance, after the Brexit vote in 2016, the price of gold increased by over 10% in just one month. Gold had a similar trajectory during the start of the Russian-Ukraine war, and this could remain true with the Israeli-Hamas conflict. People who are concerned about the potential collapse of global markets or other threats to a government's ability to support its currency find gold ownership appealing. Gold is also an attractive investment to many during election years, which can oftentimes cause higher volatility in an economy.

In addition to its economic resilience, physical gold is almost indestructible. Unlike other forms of currency like Bitcoin or the USD, it cannot be hacked, erased, adversely impacted by natural disasters, or worn down over time. Virtual currencies are susceptible to hacking due to their decentralized and unregulated nature. The transactions of these currencies are handled and recorded on multiple computers across a network, making them vulnerable to being hacked by cybercriminals. Once hacked, the virtual currency can be stolen, resulting in the loss of funds for the owner. Gold can be a valuable asset to consider when thinking about catastrophic scenarios. 

However, buying gold and knowing when to buy gold can be tricky for investors who are unfamiliar. During times of impending recessions or financial crises, gold can be looked at as an attractive investment. However, buying gold during such periods can lead to increased demand and depleted reserves. It may be wise to consider purchasing gold during periods of calm or temporary stabilization when the long-term outlook for gold remains positive. 

When purchasing gold, it is also important to understand that it is priced by the troy ounce, which is slightly higher than a traditional ounce. Gold prices, like other commodities, are influenced by the balance of supply and demand. Purchasing gold during busy times can drive up the price due to competition. It is also important to factor in the premiums that are typically paid when buying gold.

Purchasing gold also requires having a sound storage plan. Storing large quantities of gold at home can expose you to the risk of theft, so some prefer to insure it and find an off-site storage location. If you plan to hold gold in an IRA account, the IRS requires that it be stored with a metals-specialist custodian through a gold IRA.

If you’re someone who is looking to invest in gold, finding the right dealer is the first thing to think about. Not all traditional financial services firms deal in gold. Banks and gold dealers are the primary sources for buying bullion, while minted coins can be obtained from coin dealers, brokerage firms and precious metal dealers. It is important to conduct research and choose a reputable dealer – considering online ratings and trade journals and checking for any complaints. Oftentimes, firms that specialize in gold IRAs and other gold investment paths are the safest bets, and they typically offer storage options.

One leading gold firm you may want to consider is Preserve Gold, a U.S.-based precious metals firm with 0 BBB complaints and excellent reviews. The company specializes in helping individuals and families diversify and hedge their wealth through tangible precious metals. The firm provides a selection of gold, silver, platinum and palladium coins and bars. 

Preserve Gold distinguishes itself through its focus on three core principles: integrity, transparency and consistency. These principles serve as the company’s foundation for long-lasting customer relationships and reinforce the company's commitment to providing trustworthy and reliable services. To ensure a smooth and secure purchasing process, Preserve Gold offers an informed and easy way to acquire precious metals. The company's knowledgeable team assists clients in making educated purchasing decisions while prioritizing security and ease of transaction.

Gold investments have stood the test of time, remaining a key part of investment strategies for centuries. Throughout history, gold has been universally recognized as a store of value and a hedge against economic uncertainty. Its durability, scarcity and intrinsic value have made it a reliable asset for helping to protect wealth. Despite the emergence of modern financial instruments, gold continues to hold its place as a reliable investment option, offering stability and diversification to portfolios in an ever-changing economic landscape. Its enduring appeal and long track record of maintaining value make gold an enduring choice for investors seeking to protect and grow their wealth.

Featured photo by Rene Böhmer on Unsplash.

This post contains sponsored content. This content is for informational purposes only and is not intended to be investing advice.