Latest / Silver FM 100.6 / Gold is having a moment. Is now the time to invest?

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Gold is having a moment. Is now the time to invest? · Silver FM 100.6

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  Speaker 2: You're listening to Life Kid from NPR.
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  Speaker 3: Hey, it's maryel I lost a gold hoop earing the
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  Speaker 3: other day, one of several pieces of jewelry that I
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  Speaker 3: have recently disappeared. And my first thought was, I clearly
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  Speaker 3: cannot be trusted with real gold jewelry, because have you
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  Speaker 3: seen the price of gold these days?
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  Speaker 4: Gold has just been on this record breaking tear and
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  Speaker 4: now the price has been going up for a few years,
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  Speaker 4: but last year was the best year for gold since
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  Speaker 4: nineteen seventy nine.
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  Speaker 3: This is Maria Aspin. She's a finance correspond at NPR,
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  Speaker 3: and she says gold tends to be seen as a
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  Speaker 3: safe haven investment when things are looking scary in the world.
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  Speaker 4: It's sometimes called part of the fear trade. So in
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  Speaker 4: the past year, we've had a trade war, we've had
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  Speaker 4: a real war in Iran, We've had an energy crisis
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  Speaker 4: where we've seen concerns about inflations still not being under control,
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  Speaker 4: and gold is often seen as a hedge against all
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  Speaker 4: of that.
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  Speaker 3: So maybe you're wondering should I get in on this
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  Speaker 3: if gold is doing so well? And I have heard
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  Speaker 3: a lot of ads on YouTube and podcasts suggesting exactly that.
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  Speaker 3: On this episode of Life Get I talked to Maria
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  Speaker 3: about this will go over what it actually means to
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  Speaker 3: buy gold. You don't necessarily have to own the physical stuff,
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  Speaker 3: whether it's a good long term investment because the price
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  Speaker 3: is super volatile, and how it's returns compared to the
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  Speaker 3: stock market over time. Maria, you just shared some of
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  Speaker 3: the reasons that people are buying gold right now.
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  Speaker 2: I think in a lot of cultures too, that's just
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  Speaker 2: the thing you do.
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  Speaker 3: You buy someone gold for their birthday or when they graduate,
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  Speaker 3: and it's seen as more reliable than the currency in
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  Speaker 3: some countries.
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  Speaker 2: So I wonder is there a currency element in the.
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  Speaker 3: US as well now, where people are like, the dollar's
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  Speaker 3: value is dropping, so we're now more bullish on gold.
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  Speaker 4: Yeah, And actually it's not even the US. It's central
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  Speaker 4: banks around the world have traditionally held a lot of
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  Speaker 4: their reserves in US dollars, and last year, especially between
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  Speaker 4: President Trump slapping a whole bunch of tariffs on almost
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  Speaker 4: everything the US imports, as well as some of his
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  Speaker 4: threats to the Federal Reserve's independence, all of that yielded
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  Speaker 4: what was known as a sell America trade. In other words,
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  Speaker 4: like countries around the world, governments around the world started
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  Speaker 4: worrying about the safety and security the US government and
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  Speaker 4: the US system and started rethinking whether they wanted to
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  Speaker 4: hold as many of their reserves in US dollars. And
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  Speaker 4: we saw many central banks sell some dollars and swap
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  Speaker 4: to gold. So that contributed to driving the price of
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  Speaker 4: gold up. And then everyone sees the price of gold
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  Speaker 4: goes up, which makes you and me sit down and
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  Speaker 4: be like, oh, gold is really going up? Should I
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  Speaker 4: invest in it? Maybe it's a good investment. I don't
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  Speaker 4: want to be left behind.
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  Speaker 3: Right when we say gold prices are going up, what
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  Speaker 3: are we actually looking at? Is this the price of
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  Speaker 3: an ounce of physical gold?
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  Speaker 4: Yes, it's the price of an ounce of physical gold,
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  Speaker 4: But there are a couple of different prices. There's the
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  Speaker 4: spot price, which is what it is to buy gold
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  Speaker 4: on the spot meaning right now. Or there are gold futures,
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  Speaker 4: which is like any other future, a contract that an
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  Speaker 4: investor enters into to buy gold when it hits a
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  Speaker 4: certain price now spot gold can often in fluence the
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  Speaker 4: price of futures, and they tend to be connected. Sometimes
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  Speaker 4: there's a big difference, but often not. Gold jewelry has
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  Speaker 4: long been a way of buying gold, a way of
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  Speaker 4: storing value and giving people gifts or making sure that
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  Speaker 4: your loved ones has something that has an inherent worth
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  Speaker 4: in and of itself. Right, we could go to Costco
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  Speaker 4: today and buy some gold.
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  Speaker 3: So when we're buying gold, it could be literal gold bars,
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  Speaker 3: but there are also lots of other ways to buy yes.
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  Speaker 4: And frankly, when we're talking about should you buy gold
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  Speaker 4: as part of your broader investment portfolio, we're probably talking
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  Speaker 4: about some of the less literal types of gold. So
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  Speaker 4: you could buy into their exchange traded funds or ETFs
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  Speaker 4: that are pegged to the price of gold. You could
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  Speaker 4: also buy into companies or funds backed by the stock
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  Speaker 4: of companies that are like in the gold industry, so
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  Speaker 4: like mining companies, I mean literally the companies selling the
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  Speaker 4: modern day equivalent of picks and shovels.
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  Speaker 3: Why would you choose one of these options over another
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  Speaker 3: if you were going to buy gold.
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  Speaker 4: So jokes about costco aside, there are things you have
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  Speaker 4: to think about with each type of investing in gold
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  Speaker 4: that you're considering, and let's say investing in precious metals
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  Speaker 4: more generally, if you're buying the physical stuff, you have
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  Speaker 4: to think about where are you going to store it?
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  Speaker 4: Do you have enough space, is it secure? Are you
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  Speaker 4: worried about like home invasions or robberies, or like do
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  Speaker 4: you have insurance? There are all of these downsides of
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  Speaker 4: buying the physical valuable thing and keeping it somewhere where
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  Speaker 4: you have to spend time, money, or find space to
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  Speaker 4: store it. As a broader investment class, if you're buying
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  Speaker 4: anything that's like not a mining company but pegged to
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  Speaker 4: the price of gold, like a gold back DTF. Gold
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  Speaker 4: doesn't pay dividends or interest in the same way that
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  Speaker 4: stocks or bronds do. So you're buying something or you're
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  Speaker 4: buying a fund peg to something, and you basically have
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  Speaker 4: to hold it until the price goes up and you
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  Speaker 4: sell it at the right time and reap the profit.
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  Speaker 4: And this is something that has made like Warren Buffett,
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  Speaker 4: the legendary investor, say yeah, gold isn't really worth it
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  Speaker 4: because you could buy a lot of other types of
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  Speaker 4: investments like company stocks or even land, and they will
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  Speaker 4: generate actual income and revenue and pay dividends. If you're
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  Speaker 4: buying a share of a company, you are in theory
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  Speaker 4: like watching that company make more money and grow in
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  Speaker 4: value over time, and you're benefiting from that gold. It's
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  Speaker 4: more about holding on to it and waiting to time
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  Speaker 4: your sale.
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  Speaker 2: Of it correctly.
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  Speaker 3: Whereas you'd get interest if you invest in bonds, and
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  Speaker 3: you get dividends if you invest in stocks with gold,
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  Speaker 3: you wouldn't get either of those right.
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  Speaker 4: So I talked about this with Katie Klingonsmith. She's the
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  Speaker 4: chief investment strategist for the financial advisor Edelmann Financial Engines.
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  Speaker 5: We look to include investments that make returns over time.
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  Speaker 5: And when what invests in gold, what is simply hoping
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  Speaker 5: that the price of gold goes up. When what invests
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  Speaker 5: in a company, what is hoping that that company grows
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  Speaker 5: over time, that it actually is producing things, making earnings.
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  Speaker 2: Reinvesting in the company.
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  Speaker 4: So she doesn't automatically include gold or other precious metals
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  Speaker 4: in the investment portfolios that she creates for her clients.
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  Speaker 3: Okay, so it sounds like the point here is that
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  Speaker 3: when you buy stock in a company, that stock price
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  Speaker 3: is supposed to go up and down based on the
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  Speaker 3: company's fundamentals, like its product, it's profits, it's potential.
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  Speaker 4: Yes, And whereas as we've seen with the super volatile
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  Speaker 4: price of gold in the past year and frankly the
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  Speaker 4: volatile price of gold over time, yes it's shiny, Yes,
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  Speaker 4: it's solid. It's something physical that a lot of cultures
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  Speaker 4: you know, have decided has inherent value. But it doesn't
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  Speaker 4: do anything to actually make the price go up. It's
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  Speaker 4: just kind of what external factors are making other investors
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  Speaker 4: decide that it's more expensive. And as we've seen in
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  Speaker 4: the past year, there's kind of an element of like
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  Speaker 4: fomo right now, you know, the price of gold has
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  Speaker 4: been going up, So should I buy gold because I
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  Speaker 4: don't want to miss out on this investment that's going
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  Speaker 4: up and up. One investor I talked to called it
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  Speaker 4: the momentum trade, and you know that comes back to
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  Speaker 4: central banks are buying more into gold. So retail investors
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  Speaker 4: see the price go up and they buy more into gold,
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  Speaker 4: and that's all great until something happens to kind of
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  Speaker 4: snap the spell, and we're all like, oh wait, maybe
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  Speaker 4: we are over exposed to gold right now?
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  Speaker 3: How does gold compare as an investment over time? To say,
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  Speaker 3: investing in an S and P five hundred index fund over.
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  Speaker 4: The long haul, those stock market outperforms gold. You know,
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  Speaker 4: there have been years when gold has outperformed the stock market,
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  Speaker 4: but over like the last thirty years, the S and
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  Speaker 4: P five hundred has returned about ten percent and gold
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  Speaker 4: has returned less than that.
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  Speaker 2: It's over the.
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  Speaker 4: Last thirty years or so, gold has returned more along
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  Speaker 4: lines of eight percent.
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  Speaker 3: Okay, it seems like, particularly in this moment, it would
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  Speaker 3: have been a great time to buy gold a year ago,
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  Speaker 3: with the benefit of hindsight, of course, but now that
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  Speaker 3: the price is so high, as you mentioned, if you
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  Speaker 3: did want to buy gold, would now really be the time?
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  Speaker 4: Personally, I'm not sure it would be, but you know,
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  Speaker 4: I'm not a certified financial planner, but I've talked about
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  Speaker 4: it with certified financial planners like Lee Baker. He is
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  Speaker 4: the founder and CEO of Clari's Financial Advisors in Atlanta.
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  Speaker 6: There tends to be, in my opinion, some over hyping
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  Speaker 6: of gold in that now it's sort of like, hey,
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  Speaker 6: gold doubles, triples and blah blah blah blah blah, and
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  Speaker 6: there tends to be a push where people are cajoled,
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  Speaker 6: coor led into what I would say is an overly
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  Speaker 6: aggressive allocation of goal because it's doing well. Yet we
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  Speaker 6: know that looking in the rear view mirror to set
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  Speaker 6: your priorities and how you want to allocate your assets
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  Speaker 6: is a bad thing to do.
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  Speaker 4: I think that's just so important for any kind of investment, Like,
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  Speaker 4: don't buy into something just because you're looking into the
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  Speaker 4: rear view mirror and it's done really well in the past.
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  Speaker 3: If you did decide that you wanted to have some
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  Speaker 3: gold in your portfolio just to just to try it out,
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  Speaker 3: just because you think the price is going to continue
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  Speaker 3: to go up, what percentage of your investments might a
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  Speaker 3: financial advisor suggest that you shift from stocks or bonds
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  Speaker 3: to gold.
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  Speaker 4: So I will start by telling you that the advice
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  Speaker 4: out there is all over the place. The hedge fund
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  Speaker 4: billionaire Ray Dalyo, who founded Bridgewater Associates, he's out there
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  Speaker 4: saying you should put as much as fifteen percent of
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  Speaker 4: your portfolio folio in gold. Now that is super aggressive
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  Speaker 4: compared to what most other advice is. Some of the
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  Speaker 4: financial advisors I've talked to, like Katie, they say maybe none.
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  Speaker 4: You know, they do not automatically include any gold in
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  Speaker 4: the portfolios that they create for clients. And then Lee,
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  Speaker 4: he's kind of middle of the road. As you heard.
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  Speaker 4: He thinks that gold is pretty overhyped these days. But
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  Speaker 4: he has advised clients to buy into commodities as part
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  Speaker 4: of a more diversified portfolio. And this is his general advice.
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  Speaker 6: At five percent, I start to get a little nervous
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  Speaker 6: because something can go wrong, and it can go wrong
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  Speaker 6: at the wrong time and have an oversized impact on
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  Speaker 6: your portfolio.
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  Speaker 4: So less than five percent, his advice is less than
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  Speaker 4: five percent, And I should point out that's again his
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  Speaker 4: general advice for investing in any one thing, whether it's gold,
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  Speaker 4: whether it's one particular stock. So his advice is five
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  Speaker 4: percent is starting to be too much.
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  Speaker 3: What about precious metals in general, Like, if you're trying
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  Speaker 3: to diversify your portfolio, I wonder does it also make
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  Speaker 3: sense to invest in silver or copper.
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  Speaker 4: Yeah, I mean, and we've seen sort of silver and
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  Speaker 4: copper kind of mimic what's going on with gold. So
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  Speaker 4: silver and copper have hit record highs also, but there's
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  Speaker 4: so much less expensive, Like silver is trading at eighty
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  Speaker 4: dollars per ounce versus forty five hundred dollars per ounce
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  Speaker 4: for gold. That said, there are some more use cases
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  Speaker 4: for silver and copper in more industrial purposes than we
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  Speaker 4: see for gold. Gold can be used in some electronics,
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  Speaker 4: and obviously it's used for jewelry, but with silver and copper,
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  Speaker 4: they're used in construction and computer chips and solar panels,
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  Speaker 4: so there's like real world demand and applications for them
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  Speaker 4: beyond what there is for gold. Again, most the financial
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  Speaker 4: advisors I talked to say, if you're looking to get
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  Speaker 4: into gold, maybe look for a broader precious metals or
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  Speaker 4: commodities fund that gives you some exposure but also hedges
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  Speaker 4: your risk a little bit.
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  Speaker 3: Maria Aspin, thank you so much, Thank you so much,
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  Speaker 3: pleasure to join you all.
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  Speaker 2: Right, time for a recap.
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  Speaker 3: The price of gold has skyrocketed over the past year,
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  Speaker 3: so last year would have been a great time to buy,
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  Speaker 3: but now not necessarily looking in the rear view mirror
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  Speaker 3: to make investment choices is not the best strategy. Also,
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  Speaker 3: over the long term, the S and P five hundred
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  Speaker 3: outperforms gold. But if you'd like to add some to
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  Speaker 3: your portfolio to diversify a bit and maybe take advantage
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  Speaker 3: of any further price increases, Maria's source said to aim
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  Speaker 3: for less than five percent. You can buy gold by
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  Speaker 3: the bar. You can invest in gold futures, though that's
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  Speaker 3: generally something only professional investors do. You can also invest
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  Speaker 3: in a fund that tracks the price of gold, and
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  Speaker 3: you can invest in companies that are involved in the
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  Speaker 3: gold economy, like gold miners or retailers. Also, if you
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  Speaker 3: want to diversify in general, maybe consider other precious.
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  Speaker 2: Metals in addition to gold, like silver and copper.
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  Speaker 3: The thing about those is they are also used in industry,
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  Speaker 3: so their value is pegged in part to their usefulness,
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  Speaker 3: as opposed to gold, which runs largely on vibes.
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  Speaker 2: All right, that's our show.
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  Speaker 3: episode of Life Kit was produced by Margaret Serino. Our
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  Speaker 2: I'm Mariel Segarra. Thanks for listening.