For thousands of years, gold has captured the hearts and minds of humans. It is a tangible asset that offers a hedge against inflation and the weakening purchasing power of fiat currencies (i.e., those backed by the issuing government rather than a commodity).
Investors have noticed an uptick in articles praising the virtues of the yellow metal, as the price of gold increased over 30% between January and October 2024. Some even argue that the recent rise of gold is still in the early innings of a multi-year bull market and that investors would be wise to allocate part of their portfolio to the commodity.
Let’s explore the bull case for gold and why it could be a smart addition to your investments, especially during economic uncertainty.
Gold vs. the Current Economy
In today’s investing environment, we have:
- Sticky high inflation
- Middle East tensions that could disrupt energy markets
- Washington’s out-of-control spending, deficits, and mounting federal debts
- High interest rates
- Political turmoil
All of these things were prevalent in the 1970s—the last time gold was the best-performing asset class for a decade. The 2024 surge in gold set new records, as the commodity is typically favored for its steady, long-term growth rather than short-term returns.
And some prognosticators expect the growth to continue. In October 2024, Goldman Sachs reported that gold is predicted to reach $3,000 per troy ounce by the end of 2025.
Making the Bull Case for Gold
So, why add gold to your portfolio?
First, it is invaluable as an industrial metal because it is resistant to corrosion and offers excellent electric conductivity. New supplies remain low and predictable, and the precious metal’s demand remains high as it is used increasingly in a wide range of industrial and technology sectors.
Gold also has a low correlation to conventional stocks and bonds, creating a hedge against systemic risk in the capital markets. Its price also tends to rise when the U.S. dollar is weak or, as mentioned earlier, during economic and political volatility. And of course, many cultures value its beauty in jewelry and family heirlooms.
Are you considering diversifying your investment portfolio with gold? It could help reduce your volatility and risk. Speak with a Carlson Investments advisor today to discuss your goals and options.
Carlson Investments does not provide tax, legal, or accounting advice. This content has been written for informational purposes only. Always consult your individual tax, legal, or financial professionals for advice tailored to your situation.
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