Gold and silver are in the middle of a bull market that could end up rivaling the one from 2008-2011. With a weak economy, political uncertainty, and the prospect of another financial crisis, the stage is being set for gold and silver to really break out. Thousands of investors have seen the writing on the wall and have decided to invest in gold and silver to protect their assets. But many treat their investment as a one-and-done deal and fail to take advantage of the opportunity to keep investing in gold and silver.
Many investors think that they need to invest a certain percentage of their assets in gold and silver. Once they hit that target, they often keep things that way, and don’t bother reassessing their portfolio performance and their asset allocation. But if stock markets crash and gold skyrockets, wouldn’t you rather have increased your holdings of gold? And wouldn’t you want to make that decision before stocks crash and gold takes off, so that you can maximize your investment gains and minimize your losses?
Investing in gold and silver is just like investing in any other asset and, rather than thinking about your precious metals holding statically, you should think about them dynamically. Here are three reasons you might want to think about adding to your existing precious metals investments.
1. Dollar Cost Averaging
You’ll hear about dollar cost averaging when it comes to investing in stocks, but you rarely hear about it when it comes to investing in any other assets. But dollar cost averaging can still help you when it comes to investing in gold and silver. If you had invested in gold in 2011 at $1,500 an ounce, you’d be sitting on some nice gains right now. And if you had invested some more in 2019 at $1,400 an ounce, not only would you be sitting on some good gains, but you would have reduced your average cost per ounce to $1,450.
But if you had purchased gold every year since 2011, even just small amounts per year, you could have reduced your average cost per ounce to under $1,400 per ounce, making your gains even more impressive. Going forward, there’s a strong likelihood that gold will continue to grow as the US economy weakens. Many analysts are forecasting the next decade to be one of weak growth for stocks, given how elevated and overpriced they are today. Continuing to reassess your investment portfolio and take advantage of opportunities to dollar cost average, such as buying on dips and retrenchments, could help strengthen your investments.
2. Taking Advantage of Growth Opportunities
Stocks today are trading at incredibly high levels, and by most measurements are considered extremely overvalued. The opportunities for continued stock market growth, particularly given an economy that is still weak, just aren’t there. And with the prospect of greater money creation, higher inflation, and higher unemployment, gold could become one of the best growth assets of the next decade.
Many investors may not want to invest in gold today at such high prices, thinking that just last year it was trading for around $1,500. But if gold climbs to $2,500 this year, or $3,000 next year, wouldn’t you kick yourself for not investing? That goes double if stocks end up crashing this year like they did in 2008.
Take a look at your investing horizon and figure out how many years you’re going to hold gold. After all, you may decide in the future to engage in profit-taking if gold really climbs. And if you’re investing in gold through a gold IRA, you’ll eventually be required to take required minimum distributions (RMDs) at age 72. If you’re waiting for gold to drop back down to a more “reasonable” level before buying, you might not have that opportunity.
3. Protecting Against the Future
No one ever knows what the future holds, but the future of this country doesn’t look that great right now. It’s probably an understatement to say that many people are fearful of the country’s trajectory. Given the latest political machinations in Washington, and the counter-reaction that is occurring right now, the next several months could be fraught with political tension.
On the economic side of things, President Biden will be expected to increase stimulus payments to individuals to $2,000 as soon as possible. That will mean hundreds of billions of dollars of immediate spending that hasn’t been budgeted for. And given the continuing weakness in the economy, a further stimulus payment later in the year can’t be ruled out either.
That unfunded and unbudgeted spending could be only the tip of the iceberg when it comes to increased government spending in the coming years. Much of that spending will be funded by increased debt issuance, which presumably will be monetized by the Federal Reserve. And the more money the Federal Reserve has to create out of thin air, the less valuable each dollar will be.
The Fed has already committed to pushing inflation above its 2% target rate, and if you look at money supply figures, they’re well on the way to doing that. Money supply totals have seen massive increases over the past year, and further debt monetization would only drive them higher. It’s only a matter of time before Americans start seeing those price increases showing up at the grocery store, the gas pump, and elsewhere.
You might think that your holdings of gold and silver are sufficient for your purposes right now, but what happens if inflation begins to rise out of control? What if inflation rises to 4% per year, 6%, or even 10%? And what if it stays that way for years?
If your portfolio consists mostly of stocks, will those stocks earn you high enough returns to overcome that inflation? If you’re nearing retirement and holding a retirement asset portfolio that’s weighted more and more heavily towards bonds, how badly will you fare as debtors get to repay you with increasingly worthless money? Stranger things have certainly happened, which is why you can’t be too careful when it comes to protecting your retirement savings with gold and silver.
Are You Prepared?
With everything going on in the world today, now is the time to take stock of your financial situation, reevaluate your investments, and make decisions about how to protect yourself in the future. Are you prepared for any eventuality? How would your investments fare in the event of another 2008-like crisis that sees markets drop over 50%? How about a Depression-like drop of 80% or more? Could you survive in retirement after suffering those kinds of losses?
Those are tough questions to ask yourself, and tougher ones to answer. But you’re going to have to face them if you want to make sure your investments are secure enough to last you the 20 years or longer you might expect to live in retirement.
Make sure that your retirement savings don’t disappear when you need them most. Talk to a Goldco representative today to find out how investing in gold and silver can help protect you both now and in the future.