By J.P. Dahdah, Founder & CEO of Vantage
Is investing in precious metals a good idea in the current economic environment?
Tangible assets such as gold perform very well during a low interest rate environment, when central banks are adding liquidity in an effort to spur economic growth. With the Federal Reserve, Bank of Japan, European Central Bank and Bank of England all undergoing quantitative easing, tangible assets should continue to outperform for the foreseeable future.
Many investors view gold as a way to pass on and preserve their wealth from one generation to the next. The proliferation of exchange traded funds has made precious metal investing a popular alternative asset transaction. Gold is viewed as a hard asset that can be a hedge against increasing inflation, as well as the devaluation of a currency. Central bank activity that is constructed to purchase assets and increase liquidity is geared to assist in wealth creation — which is beneficial to hard assets such as gold and silver.
Gold and silver can be purchased as bars or coins, along with futures contracts or exchange traded funds. Coin and bars can be purchased and stored in regulated facilities, where investors can own the physical assets. In its purest form, gold is 99.99% pure gold, which is the quality used as a deliverable metal for most regulated futures contracts. Investors who are looking to own physical gold need reputable intermediaries to assist in the process of purchasing coins or bars, and a relationship with a regulated storage facility who will protect and hold their physical assets.
Exchange-traded funds are transacted like stocks and are trusts that solely hold physical gold and futures contracts. Futures contracts are agreements that provide an obligation between two parties to purchase and sell physical gold at a specific date in the future.
Gold has provided investors with substantial returns over the past five years, which coincides with the beginning of the financial crisis. During this period, gold prices have doubled. Despite this historic rise, a return to a period when the Federal Reserve normalizes its monetary policy is years away and until this occurs, tangible assets such as gold should remain robust.
Investing in precious metals can produce tangible results during the current economic environment. The global economic environment continues to require liquidity from global central banks, which will generate robust returns for precious metals for the foreseeable future.
For more information on how you can discover your IRA investing alternatives, contact our team at (866) 459-4590 or ClientService@VantageIRAs.com.