The investment landscape is shifting, and it seems that an asset once shunned by investors is now gaining traction. For years, this asset has been overlooked, even despised. Despite its historical reputation as a safeguard against inflation, it remained stagnant throughout 2022’s inflation surge. With bond yields skyrocketing and 5% interest rates becoming a certainty, even its most ardent supporters were losing faith.
However, I’m here to tell you that it’s time to reconsider this asset.
I’m not typically a gold enthusiast, but I do recognize its value. Gold, a tangible asset, has served as a store of value for millennia, with gold coins being used in commerce as early as 550 B.C. Regardless of the state of the economy, even in the event of a banking collapse or economic meltdown, gold will always retain its value. It’s this reliability that makes gold a “chaos hedge.”
But gold isn’t without its drawbacks. It’s not a productive asset and doesn’t yield any returns. This lack of productivity can deter many investors, particularly when interest rates are at their highest in a decade. It’s no wonder that investors have recently been less than enthusiastic about this precious metal.
In the Health & Wealth Bulletin, we’ve been tracking gold’s performance and the lack of investor interest over the past few years. However, as the economic outlook becomes increasingly uncertain and fears of a looming recession grow due to escalating debt levels, investors are once again turning to the safety of gold.
For the first time since May, gold funds have seen an influx of capital. If bond yields decrease in the coming months, we could witness a resurgence in gold investment. The opportunity cost of holding gold, which yields no returns, would be less significant, and investors may prefer the security that gold offers over other income sources.
I firmly believe that every investor should have some gold in their portfolio, especially in these uncertain times. Whether you choose to invest in physical gold or gold funds is up to you.
Purchasing physical gold can be more complex than buying gold stocks. It requires finding a trustworthy dealer and arranging storage. The most straightforward way to gain exposure to gold prices is through SPDR Gold Shares (GLD). This exchange-traded fund is less risky than buying shares in a gold mining company, which can be more volatile than gold prices, and can be easily purchased through your brokerage account.
I recommend that conservative investors allocate 10% to 12% of their portfolio to gold and other chaos hedges. If the economy takes a turn for the worse in the next year, you’ll be glad to have these assets.
I’m not the only one who sees potential storm clouds on the horizon. The same individual who accurately predicted the 2020 crash, the 2022 crash, and the recent market bottom has a new prediction. If you have any investments in the market, you won’t want to miss what he has to say.
In other news, the best and worst performing investments of 2022 range from bitcoin to underperforming stocks. On a different note, Austan Goolsbee of the Federal Reserve suggests that a significant drop in inflation without a recession is still a possibility.
Here’s to our health, wealth, and a great retirement.
Let us know what you think, please share your thoughts in the comments below.
