Is now a good time to invest in a gold ETF?

Now might be a good time to put some of your money into a gold ETF.

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Buying gold is one of the oldest investments in the world. Ever since people have known about the precious metal, they have held it as a sign of wealth. And while there is one well-known way to invest in gold – owning gold bars, coins and jewelry – there are many other ways to connect your wealth to the world of gold.

One way to put your money into gold is to use a gold exchange-traded fund (ETF). They allow you to invest in the gold market without having to buy physical gold. Although it may not make sense to put all your money into a gold ETFthis might be a good time to move some of your funds into one.

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Is now a good time to invest in a gold ETF?

While everyone’s financial situation is different, this may be a good time to put some of your money into a gold ETF. Here are a few reasons why this investment might make sense for you.

There are various options to choose from

Generally speaking, there is two types of gold ETFs you will have to choose from: those that invest in physical gold and those that invest in the companies that mine gold.

Using an ETF that invests in physical gold allows you to own the asset without having to deal with the hurdles that come with owning gold bullion. While you own physical gold can be a good investment, requires a little work. Not only do you need to buy the gold from a reputable gold dealer, but you also need to find (and pay for) a safe way to store your gold. You will also need to insure it.

If you don’t want to own physical gold but still want to participate in the market, a gold ETF focused on mining can be a good choice. The share prices of these companies often rise and fall with the price of gold, so they are still a conduit of the gold market. Many also pay dividends, so you can get some income from your investment as well.

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Your investment can hedge against inflation

Inflation has been a major concern in the United States over the past 18 months. While the Federal Reserve’s actions have reduce the inflation rate, still above the target of 2.0% y/y. For this reason, it may make sense to continue investing in gold through a gold ETF – because gold is considered an effective hedge against inflation.

It might sound complicated, but it’s pretty simple. When the rate of inflation is high, your money loses purchasing power because each dollar is worth less in the market. Other investment choices could lose you value even if they make gains if the gains are slower than the rate of inflation. Gold tends to move along with the rate of inflation, so your money will retain its value.

The initial investment can be minimal

One of the reasons some people are afraid to invest in gold is that it is quite expensive – as of December 27, 2023, the spot price of one ounce of gold was $2,067.65. When investing in gold ETFs, however, the initial investment amount can be much lower. You just need to be able to buy one unit of the fund.

]While these stocks have prices that fluctuate like any other ETF or stock, many high-quality gold ETFs currently trade for less than $100 per share. So if you want to get involved in the gold market but don’t have enough for a serious investment, buying a few shares of a gold ETF could be the right entry point for you.

The bottom row

While investing all your money in gold usually doesn’t make sense, having some money in a gold ETF might make sense for you. You can choose between an ETF that buys physical gold and one that invests in gold mining companies. Either way, you’ll get inflation protection and some protection if the economy goes into recession.

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