If You Invested $1,000 in Gold, Here’s What It Would be Worth Right Now

Saturday, September 12, 2020, 6:00 AM | Leave Comment

The price of gold fluctuates but generally trends upwards over time. As of the time of this writing, the 10-year increase is 55.67%.

This means that if you invested $1,000 in gold 10 years ago, it would be worth $1,556.70 today.

Additionally, reviewing the pricing trends for 2020, you can see that gold prices spiked during the global pandemic as investors favored commodities over stocks.

This is a typical trend during economic downturns and times of uncertainty.

Let’s take a closer look at the returns and risks of investing in gold and considerations for including it in your investment portfolio.

If You Invested $1,000 in Gold, Here’s What It Would be Worth Right Now

  • Lack of Return

    Most financial assets have yield, a return generated from holding a security for more than one year. However, as part of gold’s special nature in the economy, it’s considered a risk-free asset. With no transfer of risk, there is no risk premium with gold, which is expected to retain its real value over time.

    Like bonds and other low-risk investment options, there’s a lower return on investment with gold than with riskier securities.

  • Risks Due to Volatility

    Gold’s long-term, intrinsic value makes it a favorite investment vehicle in a fluctuating economy. However, gold prices are volatile and just as risky to pin your faith on as stocks. Investors turn to gold as a place to store value rather than make a profit. That’s why gold prices are widely regarded as an indicator of investor confidence.

    Gold prices spike in the following circumstances:

    • Perceptions of a crisis reduce expected growth in the economy, triggering a desire for stable assets such as gold, cash and government bonds.

    • When inflation rises, reducing spending power

    When the cost of labor and materials trigger inflation, gold doesn’t sharply increase in value. However, during a recession, when the value of currency remains low, people tend to favor gold investments. Eventually, people may lose confidence in U.S. government bonds, pushing gold prices even higher.

    The intricate relationship between gold, supply and demand, and inflation tends to have a noisy correlation. It’s not easy to pinpoint when to buy gold with cash to hedge your losses.

  • Gold’s Role in Your Investment Portfolio

    If your portfolio consists mainly of equities, investing in gold can diversify your investments and stabilize your investment strategy. This is particularly true if you hold high-growth, high-risk stocks or funds that you wish to hedge against losses.

    If You Invested $1,000 in Gold, Here’s What It Would be Worth Right Now 2

    This chart compares equities (S&P 500 in red and the Dow Jones in blue) to gold and silver prices, which outperformed equities greatly in the decade following the 2001 recession. As equities begin to decline, gold in your portfolio will rise in times of a financial crisis.

    Along with gold, consider other assets to diversify your investment strategy. For example, treasuries and well-rated municipal bonds carry lower yields than equities but higher returns than gold. Many investors include long-term bonds in their portfolio.

    Inflation-linked bonds are linked to inflation on a daily basis, using the CPI as an index. During inflationary periods, these bonds can balance out your portfolio. They include industrial metals, energy and similar bond issuers.

  • Purchasing Through Trading Platforms

    Trading platforms offer ETFs that include gold in their funds. Check out the best online trading platforms in Canada to get started. If you want affordable guidance on diversifying your portfolio, a robo advisor can help you protect your principal. Robo advisors match your portfolio to a number of factors, including your risk profile and rebalance your investments automatically.

    If you decide to include gold or gold-based funds in your portfolio, consider how it plays into your overall investment strategy. Overemphasizing diversified funds can stunt your overall return if you don’t balance them with growth assets such as equities.

Author BIO

Kris Lamey is a senior financial analyst with 20 years of experience in corporate finance and a long-time freelance writer. She lives in Pennsylvania with her family.

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