Gold has been a popular choice for investment for decades, and for good reason – it is a tangible asset that does not depreciate solely due to market crashes or economic panics. If you are considering investing in gold as a newcomer, what do you need to know?
In the past year, the price of gold has reached unprecedented highs. Geopolitical tensions and global trade uncertainties have led to gold briefly surpassing $3,500 per ounce in the first half of this year. Following this peak, the price of gold fell back slightly, standing at just under $3,370 per ounce by the end of May.
According to a report by CBS News, this price dip has presented an entry point for some who are interested in investing in gold, especially given the current economic climate. While inflation has eased from recent highs, certain sectors remain robust, interest rates are relatively high, and concerns about geopolitical instability continue to drive investors towards seeking safe-haven assets. Gold can serve as a wise addition to an investment portfolio during uncertain times, acting as a hedge against currency fluctuations, economic recessions, or stock market volatility.
Here are three things newcomers need to understand when investing in gold:
When most people think of gold investments, they envision shiny coins or bars stored in vaults. While physical gold is undoubtedly an option, there are diverse investment methods, each with its own risks, costs, and returns. At present, some options may be more suitable for beginners.
Physical gold, such as bars or coins, provides tangible ownership but comes with premiums, storage issues, and resale challenges. Given the recent surge in premiums for physical gold due to high demand, investors may end up paying significantly more than the spot prices for these products.
Gold Exchange-Traded Funds (ETFs) allow individuals to invest in gold without having to personally store it. These funds track the price of gold, making buying and selling more convenient. Currently, gold ETFs provide one of the most efficient and liquid entry points for beginners looking to invest in gold.
Gold mining stocks and mutual funds linked to gold companies can offer greater upside potential but come with stock market risks. Due to their correlation with company performance and broader market trends, these funds often exhibit higher volatility compared to physical gold or gold ETFs. Given the current market uncertainties and the possibility of a rate cut by the Federal Reserve later in 2025, beginners may need to exercise caution with mining stocks unless they are willing to tolerate short-term price fluctuations.
During times of economic uncertainty, it is easy to assume that gold prices will soar, but timing the market is no easy task. While gold is known as a safe-haven asset, its price is influenced by multiple factors, and sometimes these factors’ trends may be contrary to expectations.
For instance, the Federal Reserve currently hints at a possible rate cut before the end of the year. Lower interest rates typically boost gold prices as they reduce the opportunity cost of holding non-income-generating assets like gold. However, gold prices already reflect some optimism, and if inflation rises or geopolitical tensions ease, gold prices may stabilize or even decline in the short term.
This does not mean that gold is not a good investment. It just indicates that beginners should avoid chasing short-term performance. A better strategy is to view gold as a long-term hedge rather than a quick profit-making tool. Diversifying gold investments into stocks or other high-risk assets can help balance a portfolio, but gold should not constitute the entirety of one’s assets.
One lesser-known risk of gold investment is the potential to overpay or, worse, being scammed. As gold is highly sought after in uncertain times, predatory sellers and deceptive marketing often increase when demand surges. Beginners should be particularly cautious now.
Beware of unsolicited offers, aggressive demands for the purchase of coins over bars, and companies coercing buyers into placing all their retirement savings into individual gold retirement accounts at high costs. If considering purchasing physical gold, work with reputable dealers who offer transparent pricing. Compare premiums, check ratings, and steer clear of dealers who refuse to provide quotes over the phone or online.
If opting to invest in gold ETFs or mutual funds, stick to well-known platforms and funds with low expense ratios. Many beginners find these investment tools simpler and safer, especially in the initial stages.
(This article is for general information purposes only and does not intend to offer any recommendations. Epoch Times does not provide investment, tax, legal, financial planning, real estate planning, or other personal financial advice. For specific investment matters, consult your financial advisor. Epoch Times does not assume any investment responsibilities.)