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Gold prices have dropped from their peak at the beginning of the year, but they’re still relatively high. Hovering steadily around the $4,700-per-ounce range since April, gold has been buoyed by geopolitical turmoil and the recent decision from the Federal Reserve, which has many wondering where interest rates will head next. The Fed’s rate policy is one of several factors that can drive gold prices. At the same time, with the price significantly lower now than it was a few months ago, it could make sense to get started before the price ticks up again.
But does that mean it’s a good idea for you to invest in the precious metal right now, especially if you’re a senior in or nearing retirement? And if so, how should you approach it? We asked experts for their insights on what seniors should (and shouldn’t) be doing with gold in today’s market. That’s what we’ll break down below.
Get invested in gold before the price rises again here.
Should seniors change their gold investing strategies this May?
Not sure of the right approach to take to gold this month? Here’s what some experts recommend seniors do right now:
Buy enough to diversify
Market conditions are volatile at the moment. Geopolitical uncertainty abounds, and with rising inflation, no one’s quite sure what move the Federal Reserve will make next. All of that means more risk — particularly with traditional investments like the stock market.
“At a time when markets are navigating geopolitical fragmentation, inflation risks and growing fiscal imbalances globally, gold remains one of the few assets without direct counterparty risk,” says Hiren Chandaria, managing director at digital gold platform Monetary Metals.
What that means is that for seniors looking to protect themselves against this added risk, gold can serve as a good diversifier, allowing you to protect your wealth when other asset classes may be falling.
“Gold is known as a safe-haven asset during turbulent times, meaning it is often uncorrelated with the stock market,” says Corey Bates, investment advisor at Solomon Financial. “That makes gold an excellent way to add some diversification to the portfolio, which can reduce overall risk.”
Start diversifying your portfolio with gold now.
Look into gold ETFs or mining companies
With inflation rising and fuel prices surging lately, it can be smart to choose gold options that can be fast and easy to sell if you need cash in a pinch. Physical gold, for example, can take time to sell and offload. You also may need to retrieve it from a storage facility before you can liquidate it.
Gold ETFs are one alternative you can explore. As Eric Elkins, CEO of Double E Financial Solutions, explains, “ETFs are liquid and easier for both the investor and the advisor to manage and monitor ongoing.”
Gold mining companies can also be a profitable option to explore, according to Thomas Winmill, portfolio manager of Midas Funds, whose MIDSX fund invests in companies such as these.
“In a positive gold price environment, gold mining companies enjoy amazing operating leverage,” Winmill says. “Their profits and share price can increase by a multiple of the increase in the gold price.”
Sell if you have too much
For seniors, experts recommend keeping your gold allocation low — somewhere between 3% and 10%, depending on who you ask. This is because gold isn’t a great income-producer, and in retirement, it’s important to prioritize investments that will deliver regular earnings (ones that can cover your living expenses and medical costs now).
“If you have more than 3 to 5% of your assets in gold, then sell an amount to keep some as a hedge in your portfolio, and the rest sell,” says Steven Conners, founder and president of Conners Wealth Management. “It is not going to repeat the performance that we witnessed.”
With the funds you make from selling your extraneous gold, you can invest in better income-earners to support your retirement goals. “Retirees should consider a fixed-index annuity that pays monthly income,” Conners says. “Interest rates from major insurers for lifetime income are at the highest level in years, and your principal is guaranteed not to lose any value.”
Commit to long-term holding
For the gold you do keep, make sure you’re looking at it as a long-term investment and not something you need to buy and sell on a regular basis. For one, experts don’t expect gold prices to grow too much more this year (so there may not be much of an opportunity to turn a quick profit).
“I do not see gold increasing in value this year,” Conners says. “It’ll most likely be where it is now in the next three to six months. I don’t have a crystal ball, but it has already outperformed by a wide margin, and it won’t trade like a fast-growing company.”
In general, most agree that gold is better used as a store of long-term wealth, something that functions as a part of your larger overall financial strategy.
“With the current performance of gold, it’s wise to view gold as a long-term hold rather than an opportunity to aggressively sell,” Elkins says. “Using baseball as an analogy, I would ask the investor, would you be happy with most of the time getting on base via a walk, bunt, or single? If they say yes, then gold might be a good fit.”
Invest gradually
You don’t need to make all your gold moves now. With prices likely holding steady for a bit, experts say you have time to spread out your gold investments.
“For investors looking to deploy larger sums or rebalance portfolios, a more disciplined approach may be to initially park capital in liquid money market funds and systematically allocate into gold over time,” Chandaria says. “For example, an investor targeting a 10% gold allocation could gradually shift portions of capital into digital gold or gold ETFs over several months rather than deploying everything at once.”
This not only spreads out the cost of your investment, but it can also allow you to buy at times when prices temporarily dip, giving you better returns in the long run.
As Chandaria explains,”Rather than trying to perfectly time the market, investors may be better served gradually accumulating on price weakness over time rather than deploying capital all at once.”
The bottom line
While gold can certainly be a smart investment for many consumers, it’s not right for everyone, nor does it serve every goal. Consider talking to an investment professional about your gold investing options, and stay on top of market conditions before buying in.
“Gold should not be viewed in isolation, but as part of a broader portfolio construction framework focused on risk-adjusted returns and capital preservation,” Chandaria says.
