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How to Tell if Buying Gold is Right for You

Gold has long been valued for its beauty and rarity.  In the ancient times, this precious metal played an important role in commerce, culture, and religion, and it was highly prized as a symbol of personal wealth and power.

Today, gold is considered by many as a reliable repository of wealth.  Buying gold coins is seen as a way of effectively diversifying one’s assets, and it is also used as a hedge against economic phenomena like inflation, deflation, and the reduction in the value of currencies.

But is buying gold worth it nowadays, especially in light of the economic turbulence the country has experienced in the last few years?  The question is far more complex than a simple “yes” and “no,” of course, and not least because gold prices in the future will be driven by events that have not yet happened today and cannot be predicted.

Furthermore, the answer to the question will most certainly have something to do with your goals as a buyer.  Perhaps it’s best to ask yourself why you want to buy gold in the first place.  If you have the following things in mind, chances are you are on the right track:

 

You Want to Diversify Your Portfolio

If you want to protect your wealth from being compromised during times of economic upheaval, buying gold might be the right thing to do.  Many financial advisers recommend committing between 15% to 20% of your portfolio to buying gold, silver and other precious metals.

 

You Want to Beat Inflation

Inflation happens when the price levels of goods and services rise.  When the cost of living increases, the price of gold tends to rise as well, making the precious metal a great guard against inflation.

 

You Want to Protect Your Wealth from Deflation

Deflation, on the other hand, is the general fall in the price levels of goods and services.  Deflation is counterproductive to economies because low prices can lead to lower production, lower wages, and lower demand.  It is believed that the U.S experienced a minor deflation during the 2007-2008 global financial crisis.  But even in the midst of the recession, gold prices outperformed stock prices.

 

You Are Worried About Geopolitical Turmoil

Because of the current situations in Greece, Ukraine, and the Middle East, investors are turning away from paper currencies and embracing gold, which they see safer because of its universal acceptance.  Gold can serve as a storehouse of value that provides a measure of security for individuals looking for alternatives to traditional investment instruments.

 

Gold buyers each have their own unique financial outlook and risk tolerance.  Knowing what you need today and what your goals are for the future can help you and your financial adviser decide whether or not to include gold in your asset portfolio.  All financial ventures carry some risks, so make sure that you are well aware of these and educate yourself of both the risks as well as the benefits.  When you are properly equipped with information, it is much easier to make calculated and educated decisions regarding financial matters and security.