Gold Rush: Why Investing in Gold is Misunderstood

July 20, 2023

We’ve seen high inflation these past couple of years causing your hard-earned money to lose value.

Frankly, Our money can be manipulated by government controls. Gold has been around forever as a currency, but is it a good investment?

Gold as a safe haven is misunderstood and we explain three ways to potentially hold gold as an investment.

Gold Rush: Why Investing in Gold is Misunderstood

Resources:

Full transcript:

SPEAKERS

Alex Okugawa & Anthony Saffer

Alex Okugawa 0:00
We’ve seen high inflation these past couple of years cause your hard-earned dollars to lose value, and our government has a lot of control over our money. Now, gold has been used as a currency for a long time but is it a good investment? Gold as a safe haven is commonly misunderstood. And today we’re gonna talk about three ways you may be able to hold gold as an investment.

Anthony, on the one hand, gold is a currency that goes back thousands of years. So, that’s often why a lot of people like it. However, in 2022, gold failed to provide really like a true inflation hedge. And although it did outperform by a little bit, stocks and bonds, it did still slightly fall in price. And honestly, you would think with stocks and bonds both falling in a year caused by a lot of things. But a lot of people would say it was caused by inflation, I don’t think people would really expect gold to be also slightly decreasing in price. And so gold as a safe haven asset is true to a certain extent. But there are really two reasons why that safe haven asset descriptor, or is commonly misunderstood.

Anthony Saffer 1:12
Yeah, and as a safe haven, as it’s often termed, it’s really meant as an inflation hedge, or at least that’s a lot of the way people often expected. It didn’t do that in 2022. And there are other periods where inflation was high, and gold didn’t do so well. And actually, if you go back, gold tends to do better with the anticipation of inflation, rather than inflation itself. We’ll throw this chart up there, it’s a 100-year chart of the value of gold on a real basis. And you can see, even if you go back to 1980, to where we’re at today, it’s actually lost a little bit of its value.

Alex Okugawa 1:48
Now, here’s the other thing I can see in this chart, and I know you’re going to talk about it is that gold can be very volatile,

Anthony Saffer 1:54
It can and so as an investment, like if you go back to 1980, the price of gold was about 850. And it went down to under $300, as late as 2002. And then it started to make a little bit of a comeback. And around the great financial crisis, it actually got back up to that 850 level, it took 28 years just to recover its price.

Alex Okugawa 2:19
And I don’t know what investors holding on to that as a long-term investment going. This is the year I mean most for most investors, five years seems like an eternity, when really like decades is not very long. If we haven’t met already, my name is Alex Okugawa. I’m a certified financial planner here at One Degree Advisors. If you haven’t already, please subscribe to the channel, it helps us reach more retirees like you retire with confidence. But Anthony, we also want to talk about ways that you might go about holding gold as an investment. So let’s talk about that.

Anthony Saffer 2:51
Yeah, and let’s start by saying a lot of people don’t hold gold. And that’s perfectly fine, too. I don’t think it’s a compulsory part of an investment portfolio. But if you do feel like it’s important, I’d say the first thing is to consider it in smaller increments. Because a lot of times, especially when you get in, you know, adverse economic conditions, it’s really promoted with a lot of fear-mongering. And so that leads to more people thinking, well, I need to hold everything in gold in very extreme levels, when you really can probably hold smaller allocations.

Alex Okugawa 3:25
I’d say the second thing here of maybe how you might be able to hold it is utilizing a trend-following strategy. And I think we’ve talked about this in previous videos. But when you’re dealing with an asset, such as gold that can be very cyclical, right, we saw that in the previous chart where it really has these big peaks and valleys. That’s when employing a discipline trend following strategy on that asset can make sense. Now the important thing here with trend following is it’s primarily driven by numbers and data, it’s not a motion, it’s not here’s what I think will happen. You know, you know, our currencies being destroyed, I gotta buy gold, it’s no what is the number actually say, and for some people that can be difficult when you allow the numbers to drive decisions, but on a historical basis trend following has done pretty well on an asset like gold.

Anthony Saffer 4:15
Yeah, you just have to be able to know how to do that because it is quantitatively driven. You have to be able to know what you’re looking at in terms of the statistics, but it often makes sense to hold gold in that way where you’re all following a trend, or really any commodities for that matter.

Alex Okugawa 4:30
I’d say that the last thing here is holding gold as really like an insurance policy right? Oftentimes, a lot of people when they when they think about buying gold, they’re kind of thinking of the worst-case scenario our currency is devalued, you know that’s worth nothing. So you want some physical gold and honestly, that’s when I tell people, look, if you are going to own gold, one of the best ways that you might want to do that is in a physical safe at home, right? Having it on your person In the home can sometimes be a good way to go about it if you really are concerned about owning gold as really like an insurance asset, but again, those are very rare instances. But if you’re serious about it, sometimes that can make sense.

Anthony Saffer 5:14
Yeah, because a lot of times people are holding gold for that, like anarchy type situation. And in that case, like do you really want to hold it as an ETF, if you want to have it if the currency totally fails, and you want to be able to able to use it, that’s where you’d probably want to have that physical goal and even then, in smaller increments that you could get to that you could transact with if you feel like that’s necessary. Holding that physical gold would be the way to go and really, for that matter becomes not so much an investment but actually insurance for yourself.

Alex Okugawa 5:44
And now if you’re watching this video, you’re probably watching because you’re asking yourself the question, Well, should I own gold, and we recently did make a video where’s the best place to put your retirement money in 2023 You can watch that below.

Once again, this is Alex Okugawa with One Degree Advisors and if you enjoyed today’s video, please like and subscribe for more as this helps us reach more retirees, like you, retire with confidence. We also created a guide called Five retirement mistakes to avoid, you can download that for free in the description below. It’s our free gift to you. Thanks for watching.

Transcribed by https://otter.ai

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This does not constitute an investment recommendation. Investing involves risk. Past performance is no guarantee of future results. Consult your financial advisor for what is appropriate for you. Disclosures: https://onedegreeadvisors.com/solutions/#disclosures