Gold has a few key characteristics that make it an essential tool for achieving superior returns, building long-term wealth, and hedging against economic downturns.
Striking it Rich
The term “strike it rich” originated in the 19th century, when prospectors rushed across America in search of gold. Those lucky enough to discover a shiny yellow vein in the side of a mountain, or a riverbed full of gold nuggets, lived the rest of their lives in luxury.
To this day, gold represents the spirit of prosperity and affluence. But can gold still deliver wealth to the modern investor?
The answer is yes, but not overnight. Gold plays a vital role in a robust, diversified portfolio. It has helped millions of investors hedge against inflation, protect against economic downturns, and achieve superior returns.
However, these results are not guaranteed. To bolster your wealth with gold, you need to understand how it functions as an asset.
Gold is a Hedge
Since 1971, when President Nixon removed the U.S. dollar from the gold standard, gold has kept pace with the major stock market indices. Gold is a high-performing asset, but investors typically don’t buy it expecting to 10x their money. Investors buy gold to balance their exposure to more risky assets, such as stocks.
Gold is uncorrelated with most other asset classes. When stocks are doing well, gold tends to lag. When stocks crash or stagnate, gold tends to go up.
Non-correlation between asset classes is a vital characteristic of a healthy portfolio. It doesn’t matter how much you make in a bull market if you lose it all in the next bear market.
When integrated with stocks, bonds, real estate, and other financial assets, gold reduces maximum drawdowns in a portfolio. This held true during the dot-com bubble of 2000, the Great Financial Crisis of 2008, and the COVID crash of 2020.
An investor that hedges risk and diversifies will always outperform the investor that throws all his eggs in one basket.
Gold Protects Purchasing Power
Since the creation of the Federal Reserve in 1913, the U.S. dollar has lost 98% of its purchasing power. The gold price, on the other hand, has multiplied a hundredfold. This may seem like a lot, but really gold has just maintained its purchasing power. Today, one ounce of gold purchases approximately the same goods and services it did 100 years ago.
But it doesn’t stop there: price data from Roman times suggests that gold has maintained its purchasing power for thousands of years. During the reign of Emperor Augustus (27 B.C. to 14 A.D.), a Roman centurion earned the equivalent of about 40 ounces of gold every year. The closest modern comparison to a Roman centurion might be a U.S. Army captain, who earns an annual salary equivalent to, you guessed it, 40 ounces of gold.
Governments cannot resist the urge to print money. For this reason, keeping your wealth denominated in fiat currency is a dangerous game. As the costs of goods and services rise over time, your purchasing power deteriorates.
Gold’s ability to hold its purchasing power across time will not necessarily make you rich, but it will absolutely prevent inflation from destroying your wealth!
Gold is a Savings Vehicle
In the late 19th/early 20th centuries, nearly all developed nations pegged their currencies to gold. Most European nations detached their currencies during WWI. The United States was the last country to abandon the gold standard in 1971.
When the governments severed the gold standard, their currencies lost all intrinsic value. We now live in a fiat currency world, with no restrictions on government debt, money printing, and inflation.
Today, gold’s role as a savings vehicle is more important than ever.
Did you know that modern central banks hold a considerable amount of their assets in gold? These are the smartest economists in the world. Maybe we should pay attention to how they are allocating their nations’ reserves.
Can you get rich investing in gold?
It depends on what you mean by “rich.” There are ways to get rich investing in any asset, including gold. However, multiplying your money in the short term requires a high degree of risk, perfect market timing, and complex trade strategies that are often impractical for individual investors.
Getting rich is a long-term game. It requires savings, risk mitigation, and prudent investing strategies. In those areas, gold thrives.
Secure gold savings, without the excessive fees
Your weekly gold market commentary comes from our internal team of researchers and technical experts. Vaulted gives modern investors access to physical gold ownership at the best cost structure in the industry. With personal advising from industry experts and access to premier precious metals strategies, Vaulted is the key to life-long financial prosperity. Start protecting your portfolio today.
As always, thank you so much for reading – and happy investing!
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FAQs
It depends on what you mean by “rich.” There are ways to get rich investing in any asset, including gold. However, multiplying your money in the short term requires a high degree of risk, perfect market timing, and complex trade strategies that are often impractical for individual investors.
Is vaulted gold worth it? ›
Determining whether Vaulted is worth it depends on your investment goals. If you're looking for an easy way to diversify your portfolio with gold, Vaulted can be an excellent option. With its low trading fees and low investment minimum, it's a convenient platform for dollar cost averaging.
Do billionaires invest in gold? ›
While Buffett maintains his skepticism towards gold, other billionaire investors like Ray Dalio, David Einhorn, John Paulson, and Jacob Rothschild are avid supporters of the precious metal, according to financial news company Benzinga.
Is it wise to invest in gold right now? ›
(NVDA), have been nudging gold's traditional role as a hedge against inflation and currency depreciation. KATE: It's always a good idea to diversify into gold and other precious metals. Gold does have a role as a hedge against equity market volatility, so it's worth holding to help smooth returns.
Can you get rich trading gold? ›
Although long-term protection of your wealth is often the main goal of investors, it is very possible to make money from gold, much the same as if you were trading stocks and shares. Making money from gold is a different proposition however, and more about patience than fast, reactive trading.
Should I hold gold instead of cash? ›
Is it better to hold gold or cash? For short-term needs, cash is better due to its unmatched liquidity. For long-term buy-and-hold investments, gold is preferable to protect against inflation and provide portfolio diversification.
How much does it cost to vault gold? ›
Storage costs are the same in all of our vaults for the default option, and the rates depend on the value of metals you store: the larger the value of metals, the lower the fees. At any level, our rates are very competitive, ranging from 0.5% to 0.7% per year for gold and 0.6% to 0.8% for silver.
How much gold will $10,000 buy? ›
Gold Coins: Assuming an average premium of 5% to 10% over the spot price, you can purchase around 4.5 to 4.7 troy ounces of gold coins with your $10,000. Gold Bars: With lower premiums, possibly around 2% to 5%, your $10,000 could buy you closer to 4.8 to 4.9 troy ounces of gold in bar form.
Should I invest $100,000 in gold? ›
Investing $100,000 in gold is a significant decision that requires careful consideration of the market, the types of gold available, and the associated costs. Investors should research various dealers to find competitive premiums and consider their gold holdings' long-term storage and security.
Can investing in gold make you rich? ›
It depends on what you mean by “rich.” There are ways to get rich investing in any asset, including gold. However, multiplying your money in the short term requires a high degree of risk, perfect market timing, and complex trade strategies that are often impractical for individual investors.
It takes a lot of fresh inflows to sustain gold prices. At an individual or at the level of entire economies, gold is a dead investment that does not produce anything.
Does Warren Buffett believe in gold? ›
The answer to whether Warren Buffett invests in gold is a simple “no.” This probably doesn't surprise the “Oracle of Omaha” followers, as he's been very outspoken and open regarding his investment style, strategies and ownership. He's even spoken directly about whether he would invest in gold numerous times.
Can you still get rich from gold? ›
But, more importantly, gold is still not considered a reliable income-producing asset in the same way stocks and bonds are. So while the price of the metal may be appealing to investors now — and you may be able to make more money more quickly than usual — you should still limit gold to 10% or less of your portfolio.
What is the downside of buying gold? ›
Con: Gold won't produce income as rapidly as other assets
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.
What will gold be worth in 5 years? ›
What will gold be worth in 5 years? Two Jakarta-based commodity analysts forecast that the price of gold could reach as high as $3,000 per ounce in the next five years. While they remain bullish, they cautioned that many factors could affect the price of gold within this timeframe.
Will gold ever lose its value? ›
Fluctuations in financial markets can also cause volatility in the price of gold. However, because so many investors purchase gold as a safe-haven asset, its value remains relatively constant. Long-term investments in the precious metal are unlikely to experience losses.
How to make money off gold? ›
Investors can invest in gold through exchange-traded funds (ETFs), buying stock in gold miners and associated companies, and purchasing a physical product such as coins or bullion. They usually have as many reasons for investing in the precious metal as they do methods to make those investments.
Is investing in gold a smart move? ›
Gold can help to reduce the overall risk of your portfolio by providing a hedge against inflation and market downturns. So, if your portfolio is heavily weighted toward traditional assets like stocks and bonds, adding 1-ounce gold bars to the mix can help balance your risk exposure.
Can I trade gold with $10? ›
Can I Trade Gold with $10? While it's technically possible to trade gold with $10, it's not advisable. Such a small amount would severely limit your trading options and expose you to excessive risk. It's recommended to start with a more substantial capital to engage in gold trading effectively.
Is it worth buying fractional gold coins? ›
Investing in fractional gold coins will mean that you're buying your bullion in smaller sizes and can, therefore, acquire more for the same price. If you keep at it, over and over the years, your collection will grow and you could have a formidable gold coin collection.
Even after the Great War, gold bullion is still accepted by merchants and by traders specializing in gold, for use in exchange for services as reputation changes and blueprints or plans for equipment, as well as equipment modifications.
How much gold do you get from Vault 79? ›
1000 gold bullion - In the gold processing room, west of the reactor.
How much does a gold hoarder vault give? ›
| Gold Treasure Vault Keys |
|---|
| Source | Wayfinder Voyage |
| Related | Gold Hoarder Treasure Vaults |
| Base Gold Reward | 3600 - 3750 |
| Emissary Value | 11325 |
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