Gold may look like a very solid investment and one that will serve you better than stocks or other sorts of investments. This is partially due to the current economic situation and partially due to real reasons why gold can be a secure investment. However, before you decide to invest in gold it is important that you know all the facts about whether or not gold will serve you better for your retirement than other types of investments.
One of the reasons why many people consider gold to be such a good investment is due to the recent increase in gold prices. From 2000 until 2011 the price of gold shot up dramatically. While this means that those who invested in gold before the jump made massive gains, it does not mean that this will continue over the long run. In the 70s gold prices also jumped dramatically and offered tremendous gains to those who had invested in gold. However, following the rise gold began to decline and kept declining over the next twenty years. Today’s dramatic increases in gold could be headed for a similar decline or they could continue to rise, there is no way of knowing definitely what the future has for gold. However, this is true for just about any investment that you can make.
Gold Against Inflation
There are some who believe that gold will protect them against inflation and will hold more value than other investments if inflation continues. Historically, gold has not proven to be inflation proof, in fact even at times when inflation was on the rise, gold prices were on the decline. From 1980 until 2001, gold lost 85% of its inflation adjusted value, so it was not the surefire protection against inflation. Gold prices are on the rise now but it may not even reach its adjusted inflation value.
Gold Stockpiles Against Crisis
If a real crisis occurs and the value of the dollar drops to nothing, many people believe that they will be able to use gold as currency. However, in a real desperate situation most people will find little value in gold, but instead they will look toward essentials like food and water as items of greater value. Therefore, while it is unlikely that a severe crisis would occur to leave people with no currency, gold is not likely to be the best investment to get you through those tough times. If you are planning for your retirement then this is not the sort of crisis that you should be planning for.
Gold Is Not A Sure Thing
You need to remember that gold can be just as a volatile as the stock market, as real estate and as any other investment. That is why you need to keep a very diverse portfolio so that falling prices in any one arena will not gouge your entire retirement savings. Gold is good to keep as part of your retirement, but you should not bank on it as the best way to protect yourself and your future. You should go into any investment with the expectation that it may not be successful at earning you money. This means that no single investment should get all of your savings because this could very easily lead to disaster. If you are considering investing in gold and you are being told that you are guaranteed to make money with gold, then you may want to consider finding another financial adviser.
Short Term Gains Should Not Be Viewed Over Long Term Gains
In most cases you will be using your IRA as an investment for well into the future. So you should not look at the relatively short term gains that gold has made over other investments as a sign that gold will always be the better investment. You should instead look at long term gains, over the past ten or twenty years, what has performed the best? Would you be better off if you had invested in gold over stocks 20 years ago? Right now gold is making substantial short term gains and this can make it look like a very attractive investment for your retirement.
In truth you are not looking at pulling your retirement out in the next five years, so the short term gains of gold should not be considered. Instead you want to look at how well gold has performed over ten years or twenty years. Has it still performed better than stocks in your opinion? Is it still the better option over investing in a business? This is subjective to some extent because with a self-directed IRA you invest in a variety of things that could be successes or failures. Gold may be better than some investments and worse than others. The key is not to judge any investment by its short term gains if you are looking at it as a retirement investment.