According to a recent report in Fortune, there are some forecasts that predict gold will hit the $10,000-per-ounce milestone in about three years or so. With gold’s traditional role as a hedge against inflation, it isn’t often considered a lucrative investment, but there may be opportunities to cash in on the rush.
GOBankingRates consulted with experts in gold investing to determine how someone can cash in on the rush by investing in gold to maximize their returns.
Figure Out How You Will Invest In Gold
You want to start by deciding how you’ll invest in gold. “The one thing investors need to know about investing in gold is there are two methods, the paper method, which is via ETFs in the stock market, or physical gold bullion via a bullion dealer,” said Jose Gomez, co-founder of Summit Metals, a national gold dealer.
Gomez noted that both methods have pros and cons. “Paper gold is good for quick entry, but you lose the benefit of privacy and removing counterparty risks. Physical gold, although more expensive to purchase, is typically beneficial to remove counterparty risk (which is the whole intent of owning gold),” he explained.
Check Out: 4 Things To Do When the Price of Gold Skyrockets
Read More: 6 Safe Accounts Proven To Grow Your Money Up To 13x Faster
Which Method Should You Pick?
You want to explore both choices so that you make the decision that makes sense for your situation.
“The easiest way to invest in gold is through exchange-traded funds (ETFs) such as GLD or PHYS,” said Vince Stanzione, an investor and founder at First Information. “These track the gold price minus a small annual fee and can be bought and held in any regular stock brokerage account.” He stressed that you don’t have to worry about storage issues with this method.
Gomez personally recommended owning physical gold because it prevents non-execution of metal delivery. “We have seen silver have a backwardation in the market, meaning silver delivery is unable to deliver on the paper market, showing cracks in counterparty risks not promising the silver to a buyer,” he warned.
Once you figure out how you’re going to invest in gold, you want to decide how much to invest in it.
How Much Should You Invest In Gold?
“Historically, gold performs strongly in low-rate environments, and there is no reason to expect this pattern to change,” said Alex Tsepaev, the chief strategy officer of B2PRIME Group. “If your portfolio wasn’t prepared for rate cuts, adding some gold could make sense. The recent jump shows the dollar losing value, and gold is a real, safe asset.”
He believes you should start by reviewing your portfolio to see what you’re currently holding, and whether there’s room for gold, since you may want to add to your stocks and bonds.
Gomez recommended allocating 3% to 5% of total net worth to gold, with a higher allocation of 5% to 7% for those nearing retirement. He considered buying gold similar to purchasing bonds in the sense that you want a stable asset that protects against inflation and volatility in the market.
Stanzione recommended shopping around with reputable gold dealers if you’re looking to physically purchase it. “You can check the current spot price online (let’s say it’s around $4,000/oz). Your goal is to buy as close to the spot as possible — avoid fancy collectible coins or expensive packaging,” he said. He didn’t recommend a specific amount, as it depends on your personal risk tolerance.
Determine How You Will Exit
You’ll also want to think about an exit plan. With paper gold, you can just press “sell” and get it off your hands in minutes. However, the process changes if you have decided to invest in physical gold.
Gomez mentioned that the biggest downside to physical gold is the exit strategy. You have to go into a physical store or an online bullion dealer to sell it. This process requires shipping and waiting for the funds to be deposited into your banking account. “Although it sounds scary, the bullion industry is very mature and provides full insurance for the shipment and fast bank wire payments,” he said.
Gomez also stressed that gold is a great storage of wealth and not considered an investment that will make you a billionaire. “It will protect your net worth in the same way that a home equity is built and sustained over many years,” he explained.
As always, it’s recommended to conduct your own research when making investments because there aren’t many guarantees when it comes to returns on your money.
More From GOBankingRates
- Trump's $2K Dividend: Who Qualifies and How You'll Get It
- Elon Musk Predicts 'Universal High Income' Will Pay For Everything -- How Much Would You Get?
- How Middle-Class Earners Are Quietly Becoming Millionaires -- and How You Can, Too
- 5 Things You Must Do When Your Savings Reach $50,000
This article originally appeared on GOBankingRates.com: Gold Could Hit $10K by 2028 — Here’s How To Cash In on the Rush
