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MoneyWatch: Managing Your Money
By Joshua Rodriguez
Edited By Matt Richardson
/ CBS News
Are you thinking about investing in gold this May? Doing so could be a wise choice. After all, gold has a long history as an inflation hedge, currency alternative and portfolio diversifier. However, no investment decision should be made on a whim.
Instead, it's important to weigh the pros and cons of any investment decision before you make it. And, while there are plenty of reasons to consider investing in gold this May, there are also a few reasons you may be apprehensive about doing so. That noted, it's important to know the pros and cons of investing in gold this May.
Compare your gold investment options now.
3 pros and cons of investing in gold this May
This May could be a compelling time to add gold to your investment portfolio. But before you do, consider the following pros and cons.
Pro: Inflation continues
Gold has a storied history as a hedge against inflation. And, that makes the prospect of investing in the commodity attractive in today's economic environment. After all, all three inflation reports that have been released thus far in 2024 showed inflation rates higher than economists expected. Should persistent inflation continue, it may drive gold's price further up.
Protect your investment portfolio from inflation now.
Con: Gold's price
Gold is currently trading at $2,300.56 per ounce. And that price could be prohibitive if you want to invest in gold. After all, most experts say that you shouldn't invest more than 10% of your portfolio assets in the yellow metal. So, if the value of your investment portfolio is under $23,005.60, adding an ounce of gold to it would push your gold holdings over that 10% asset allocation threshold. However, you could still invest in fractional gold and maintain a safe asset allocation. Some dealers sell gold in quantities as small as one tenth of an ounce.
Pro: Gold's price growth
Gold isn't known for fast-pace price growth. But, recent movement in the price of the commodity has been an exception to that rule. In fact, the price of gold recently went on a record run. Though gold's price has cooled since, that cooling may present an opportunity to buy low and sell at a quick, higher profit.
Con: You'll need to store your gold
At first glance, buying gold may seem akin to making any other investment. But, there are important differences between traditional investment assets like stocks and bonds, and gold. One significant difference between these investments is that when you buy gold, you'll have to have a safe place to store it (unlike stocks and bonds which are held in your investment account). That may be in a safety deposit box or a gold depository. In either case, you may have to pay a storage fee, which could cut into your earnings.
Pro: Gold is highly accessible
Gold may be more accessible today than it has ever been in the past. That's because there are so many ways to get your hands on the yellow metal. You could go the traditional route by purchasing your gold from a dedicated precious metals dealer, but you don't have to anymore.
These days, even big box stores like Walmart and Costco sell gold coins and bars. So, making your investment could be as simple as adding a stop to the jewelry counter while you're shopping for food, clothes, or other goods at some of your favorite stores.
Con: Gold won't produce income as rapidly as other assets
Gold doesn't produce income the same way traditional investments like stocks and bonds do. While stocks and bonds may offer dividends (a share of corporate profits paid to stockholders) and coupon rates (interest paid on bonds), the only way to earn an income by investing in gold is to take advantage of growth in the price of the commodity. And, that growth could slow if economic conditions improve.
The bottom line
Investing in gold this May could be a wise decision. After all, gold has long been used as a safe haven, inflation hedge and portfolio diversifier. But, it's important to consider the pros and cons of any investment before you make it. When it comes to gold, you could benefit from continued inflation, gold's price growth and the high level of accessibility of the commodity when you invest in it this May. On the other hand, gold's price could be prohibitive to making an investment and you'll need to safely store your holdings. Moreover, if economic conditions improve, gold may not produce income as fast as other assets.
Nonetheless, if you're ready to make a gold investment after considering the pros and cons above, compare your options among leading dealers today.
