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Does it make sense to invest in gold?

Gold is an interesting asset class to think about for a portfolio. Does it make sense to buy gold? In this article I'm going to share some of my own thoughts on it. 

Gold is an interesting asset class to think about for a portfolio. Does it make sense to buy gold? In this article I’m going to share some of my own thoughts on it.

Why consider gold?

A better store of wealth than cash(?)

Gold has been a store of wealth for thousands of years. People used to use gold coins to pay for things. In recent history gold has been used as an alternative asset that’s seen as defensive and could be used as a way to diversify away from currency.

The US dollar, Australian dollar or any other man-made currency could be devalued through money printing and inflation. But gold has kept growing with inflation over the decades (and centuries). The idea is that owning gold should mean the value of your wealth (in cash) doesn’t simply get inflated away. In that sense, gold sounds like a good inflation hedge. However, it’s not like you can go to your local supermarket and pay for food in gold – you would need to convert it back to your local currency to buy items. Not very practical.

How about as an investment?

The potential benefit of gold starts dropping away when you compare it to shares, or perhaps property. It’s true that the capital value of gold can rise over time. But it doesn’t make annual profit like a business or rental property does. Gold just sits there. It may be shiny, but there is no compounding growth available. With businesses, they can make profit and re-invest for more growth. And those businesses can pay out some of the dividends each year as profit. Gold does none of that.

There are many different ways to invest in gold such as VanEck Vectors Gold Miners ETF (ASX: GDX). You could go out and (somehow) find a gold bar for you to physically buy and own yourself. If I had to pick one way to invest in gold, it’d probably be through ASX gold miners because they have the ability to make profits and pay dividends, whilst also benefiting from a rising gold price.

However, gold miners face all the usual mining risks just like any other resource business. And don’t forget, gold prices can go down as well as up. That store of wealth could turn into a detractor of wealth. The gold price fell quite heavily between 2012 and 2016.

I think the best way to defend against recessions or inflation is to invest in quality, defensive ASX dividend shares like Washington H. Soul Pattinson and Co. Ltd (ASX: SOL).

$50,000 per year in passive income from shares? Yes, please!

With interest rates UP, now could be one of the best times to start earning passive income from a portfolio. Imagine earning 4%, 5% — or more — in dividend passive income from the best shares, LICs, or ETFs… it’s like magic.

So how do the best investors do it?

Chief Investment Officer Owen Rask has just released his brand new passive income report. Owen has outlined 10 of his favourite ETFs and shares to watch, his rules for passive income investing, why he would buy ETFs before LICs and more.

You can INSTANTLY access Owen’s report for FREE by CLICKING HERE NOW and creating a 100% FREE Rask Account.

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Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

At the time of publishing, Jaz owns shares of WHSP.
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