Everybody understands gold. Everyone who understands money understands how valuable gold is. This recognition gives gold an edge that most assets, commodities, or stocks don’t have: familiarity and credibility. But if you are looking to prevent yourself from falling victim to an upcoming recession, is buying in gold the best way to do it?
The answer to that is yes. Gold has always been one of the best financial hedges for investors. People who buy volatile stocks that can either go up and down sometimes invest in an asset or a stock like gold that remains steady in times of recession.
Even though it’s not the only hedge, it is historically the most proven one. Gold is also a great diversifier. For people who want to balance out their stock portfolio, especially to sustain them through a market that might be rocked by the uncertain political climate, gold is an investment to consider seriously.
Global landscape and fear of recession
The global economy may not be diving headfirst into financial crises like that of 2007-2008, but it’s not rock solid as well. The overall volume of the world trade is shrinking, the trade war between the U.S. and China is still ongoing, and significant peace crises are slowly cropping up.
Even the largest and most stable European economy, Germany, is facing an industrial recession. These indicators are slowly turning into warning signs of a looming financial crisis. The inverted yield curve, less global growth, increasing unemployment, and global unrest, all seem to come together to forecast a dark recession cloud approaching.
What does this gloomy picture mean for you investors? Thankfully, no drastic measures yet. The world has learned a lot from past mistakes. If you have a diversified investment portfolio, you will hopefully be able to weather the uncertainty, and even the recession itself.
What better way to diversify your investments than with gold? It might not give you flashy returns, and gold mining companies might not shower you with dividends, but if the stock market crashes, you will have a tangible asset that retains its value, even when we compare it to most currencies.
Gold ETFs or Barrick Gold?
When investing in gold, you can buy and hold the gold itself, which is an expensive undertaking. Or you can go for the gold ETF, which lets you own shares based on actual gold bought by a company. Another way is to invest in a gold mining company, like Barrick Gold.
Barrick Gold is the largest mining company in the world. With mining operations all over the globe, the company has more than 60 million ounces of proven gold reserves and about eight billion ounces of proven copper reserves — enough metal to take the company through decades of prosperity.
If you are looking to invest in gold, want to steady growth of your shares, and want to enjoy a bit of dividend payout as well, you might want to take a look at Barrick Gold. It is currently trading at $23.12 a share.
Gold has proven its worth time and time again, especially in tough economic periods. It is always advisable to diversify your investment portfolio. And doing so with gold has its own shiny merits. Right now, gold is trading at around $2,000 an ounce, reeling from a two-month high. You may want to look into buying into this little dip and hold onto it as a safe future investment.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Adam Othman has no position in any of the stocks mentioned.