What are the Pros and Cons of Making an Investment in Gold?

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  • Written By: Felicia Dye
  • Edited By: Melissa Wiley
  • Last Modified Date: 25 January 2020
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An investment in gold is viewed as a good method to reduce the volatility in an investor's portfolio. There are numerous ways to invest in gold that can make it suitable for a wide range of investors. For many people, however, owning physical gold is not ideal due to the need for security and insurance. Gold is also not an investment for those looking for earnings from dividends or interest.

Large numbers of financial professionals agree that an investment in gold is a good way to stabilize an investor's portfolio. According to the World Gold Council, prices for this precious metal are subject to different risks than other assets. For example, many types of investments, such as stocks and bonds, may be adversely affected when the US dollar or the US economy are struggling. Gold, however, tends to do well at these times.

This precious metal can be attractive to various types of investors because there are numerous ways to invest in it. Some people purchase gold commemorative coins, some purchase bullion, and others put their money into exchange traded funds (ETFs). In addition to these, there are several other methods of investment. Such diversity can be greatly beneficial to a novice investor because he can research and track one product but avoid putting all of his resources into a single investment.


Although gold is considered a fairly secure investment, it is not risk free. The amount of risk that is involved tends to depend on the manner in which a person's funds are invested. Funds that are used to purchase shares in a gold mining company, for example, will generally have a substantially greater risk of loss than gold bars.

The ease of buying and selling many gold products is another attractive benefit for many individuals. A person who invests in art has a substantial amount of limitation with regard to the places where and people with whom she can conduct business. With an investment in gold products, such as bars and bullion coins, an investor can travel to a wide range of countries around the globe without fear that he will not be able to trade them.

The need for security discourages many people from wanting to purchase physical gold, however. Owning it generally requires having a place to store it and insurance to cover it. To encourage buyers, some retailers will offer to store items purchased from them for a small fee or for free, which also eliminates the need for insurance. Another alternative that allows investors to avoid this problem are ETFs, which allow individuals to invest in gold without ever seeing a piece.

Many people invest as a means to generate recurring income either immediately or in the future. This makes dividends an attractive feature, but investment in gold does not generally offer a person the opportunity to earn this type of profit. Even in the case of ETFs, they do not pay dividends though they are traded like stocks. Gold investments also tend to lack interest. Simply put, gold will usually either hold its value, lose its value, or become more valuable.



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