Gold prices hit an all-time high earlier this week. Investors are more interested than ever, spurred on by a still-volatile economy and bubbling expectations for an interest rate cut from the Federal Reserve. Spot gold currently sits at just under $3,600 an ounce. That’s a remarkable overall pickup of nearly 35% since the beginning of the year. This recent increase has been the cause of many financial authorities giving their opinions on the best ways to invest in gold.
Blair duQuesnay is a chartered financial analyst and certified financial planner at Ritholtz Wealth Management. In her article, she calls out the many inefficiencies of owning actual gold. He points out that higher transaction costs and storage limitations increase its appeal for rich speculators.
“It’s much more inefficient to own physical gold,” – Blair duQuesnay
DuQuesnay further reports that gold is now moving higher. As investors look for security in their portfolios, they’re becoming more and more attracted to it. Along the way, he warns us of the dangerous seductive powers of gold. He argues, investors need to remain focused on their broader asset allocation. Most financial advisors will tell you to keep your exposure to gold to under 3% of an individual’s total portfolio.
Sameer Samana, head of global equities and real assets at the Wells Fargo Investment Institute, supports the notion that gold remains a viable investment option under current market conditions. As he puts it, “gold checks all the boxes,” giving investors a hedge as much against inflation as against market volatility.
DuQuesnay is a large proponent of investing in gold exchange-traded funds (ETFs). This group of ETFs are the most liquid, tax-efficient and low-cost way to gain exposure to gold. Specifically, the two largest gold ETFs, SPDR Gold Shares (GLD) and iShares Gold Trust (IAU), offer investors an easy and cost-effective way to profit from increasing gold prices. They allow you to dodge every inconvenience associated with owning physical gold.
“Gold ETFs are going to be the most liquid, tax efficient and low-cost way to invest in gold,” – Blair duQuesnay
So even though gold has been killing it, duQuesnay had us wondering whether this rally is completely sustainable. He remarked on the uncertainty surrounding market dynamics:
“Are we in the third inning of this rally or the ninth inning? Gold is priced as a commodity, and that can make it hard to pinpoint the fundamentals,” – Blair duQuesnay
Samana points out that during times of extreme volatility, gold equities have historically lagged bullion-backed ETFs. He suggests that anyone interested in a gold investment go with an ETF tied directly to bullion. This market alternative is likely to prove more effective overall than investing in gold-connected equities and mining shares.