Gold has been cool long before Goldfinger lusted after it in James Bond. But as an investment, is it losing its luster?

See what I did there?

A symbol of wealth and power, gold has been used for thousands of years. Today, it is still an important economic asset, with a total global value estimated at more than $17 trillion. 

Understanding why it’s so valuable, what it’s actually used for, and its pros and cons as an investment will help you decide whether to add some to your retirement account or leave it in your grandpa’s molars. And more importantly, it’ll help you answer the question, is gold a good investment right now?

First, what makes gold special?

Oh, you mean aside from the shiny gold color? Well, it’s rare, it doesn’t rust, and it lasts forever. Because it’s uncommon on Earth, the global supply increases at a relatively slow rate. 

But what can you use it for aside from making 2 Chainz’ two chains?

Turns out, quite a bit!

Jewelry: Gold is beautiful and lasts a long time, making it a popular choice for rings, necklaces, and more. Shoutout 2 Chainz.

Electronics: Gold is a great conductor of electricity and doesn’t corrode. That’s why it’s used in cell phones, computers, and other tech gadgets.

Medicine: Gold is used in some medical treatments, including certain cancer therapies.

Coins and bars: Gold is still used today in coins and bars for people who want to own it as a store of wealth.

Central banks: Governments hold gold in their reserves as a way to back up their currency and stabilize their economy.

So it’s got a low supply and lots of practical demand. Sounds like a great investment right?

Maybe.

The pros of investing in gold

Store of value: Gold has been used as a form of money for thousands of years. Even when economies struggle, gold tends to keep its value. This is why many people call it a “safe haven” investment.

Inflation protection: When the cost of goods goes up (inflation), the value of paper money can go down. Gold, on the other hand, usually keeps its value or even goes up during inflationary times.

Diversification: Adding gold to an investment portfolio can help reduce risk. When stocks or bonds are doing poorly, gold often does well, balancing out potential losses.

The cons of investing in gold

No income: Unlike stocks or bonds, gold doesn’t pay interest or dividends. If you hold gold, you won't earn any money from it unless the price of gold goes up and you sell it at a higher price.

Storage and insurance costs: If you buy physical gold (like coins or bars), you’ll need a safe place to store it. This can be costly, and you may need to pay for insurance to protect it from theft.

Price fluctuations: The price of gold can go up and down, sometimes quite quickly. This makes it a risky investment if you’re hoping to make a quick profit. It's important to remember that gold doesn’t always increase in value.

Is gold GENERALLY a good investment?

There’s no right answer here because different investments are better suited to different people. If you’re looking for something stable during times of uncertainty, gold may be a smart choice. However, if you want an investment that grows over time and provides regular income, you might want to consider other options. A balanced approach is often best: some people put a small portion of their investments into gold while keeping most of their money in other assets like stocks, bonds, or real estate.

Is gold a good investment RIGHT NOW?

Well, let’s think about where we are economically.

The global central banks have started decreasing rates. This usually boosts corporate profits since companies can borrow money at cheaper rates to fuel growth. More profit and growth usually translate to higher stock prices, as people see the growth, get excited, and invest. 

At the same time, gold does tend to creep upwards as lower central bank rates stimulate INFLATION. Gold shines during inflationary periods because, as we know, it keeps its value or even goes up during these times. However, it often struggles to keep up with stocks. 

This trend usually happens relatively early on after central bank rates start dropping. What happens after this? Often investors get TOO excited. They see the corporate growth and rising stock prices and keep investing, driving stock market prices further. At a certain point, stock prices become so high that people realize they overstate the value of the companies themselves. When this happens, they go through a CORRECTION, also known as a pull-back, with stocks going down 10% or more. 

When the economy goes through a correction, that’s a great time to hold gold because it is a store of value or “safe haven”. 

So, if you invest in gold today, you probably won’t lose significant money, but if stocks keep climbing as interest rates fall, you may lag behind stocks for a bit.

So is gold your grandpa’s investment?

In short, no! Gold is rare, durable, and has been trusted as a store of value for thousands of years. It’s used in everything from jewelry to electronics, and many people invest in it as a way to protect their wealth.

However, gold has its drawbacks, including no income and potential price swings. If you’re thinking about investing in gold, make sure you weigh the pros and cons carefully before making a decision.

And if you’re unsure if gold is a good investment for you, just remember: wearing a stock certificate around your neck looks way dumber than two chains. 

Want to know how you can invest in gold? Check out Monday’s newsletter!