If you’re planning your retirement, “When to Invest in Gold?” is an important question.
If you have yet to invest in gold for your retirement, should you start today?
We have some answers and suggestions later in this article but first it’s important to understand why you want to buy gold in the first place.
Here at goldretiree.com, we focus on owning gold as a way to protect your retirement. We are not interested in speculating on the price of gold.
We want to hold gold so that in the event of a financial crash (and there is always the chance of one) we own a physical, safe-haven asset that is likely to rise in value in times of crisis.
This is particularly important in retirement years when the time and ability to earn money has diminished or disappeared. We need to protect our wealth the best we can.
So, as a retiree, how does gold protect your wealth?
- Gold does not drop to zero – unlike a stock
- Gold will not go bankrupt – unlike a corporation
- You cannot print more gold – unlike the US dollar
- Gold is a physical asset in your name – it is not a paper asset
- In times of crisis, gold is seen as a “safe haven” for investing
- The price of gold often rises when financial markets crash
Those are just some of the reasons you you want to invest in gold.
Holding gold means you have a liquid asset (physical gold is easy to buy and sell) that can be sold to pay margin calls, turned into cash for living expenses or switched to other assets as opportunities arise.
So, for those contemplating their retirement plans, consider gold as part of your retirement savings and investment protection.
Find out more from this recommended gold buyers information kit.
Tip #1 – It’s Never Too Early to Buy Gold
If you’ve never bought physical gold before, when should you start to buy?
Simply put – start now if you have never bought gold before.
Create a habit of buying physical gold (gold bullion or gold bullion coins) on a regular basis.
The price of gold will rise and fall for a variety of reasons.
The chart from investing.com shown below displays how gold has performed from January 1980 to the start of 2017.
First, do your research on the current price of gold against its historical average. Develop an understanding of where you are in the cycle of gold.
In very simple terms, when the stock market and economy are doing well, the price of gold tends to fall. This can be a great time to buy the metal. When a financial crash occurs such as the GFC in 2007 (see our article here) the price of gold tends to hold steady and rise.
Here are some useful links to get you started:
- Wikipedia – Gold as an investment
- Investingnews.com – gold investing news
- Gold Retiree news – our daily gold & investing news service
- The World Gold Council – investing in gold
If, when you come to buy, the gold price is historically high and you have never bought physical gold before – go buy a small amount (a gold coin or small ingot) to become comfortable with the process of buying and owning gold.
Track the price of gold and buy when the price dips.
Find out more about buying gold from our recommended gold bullion dealer.
Tip #2 – Buy the Right Type of Gold
You can purchase different weights of gold bars. Buying smaller bars gives you more flexibility when time comes to sell.
There are strict guidelines as to the types of gold you can purchase for a Gold IRA (Self-directed IRA).
When setting up a Gold IRA, make sure you speak with an experienced bullion dealer who can also explain the requirements for a self-directed, precious metals IRA.
Tip #3 – Ignore the Noise
There are “experts” who will tell you gold is going to be worth $10,000 an ounce … or more.
There are other “experts” who will tell you the complete opposite, gold is going to lose 80% of its current value.
That is all just noise.
There is no single expert who is correct all the time and if you wait long enough, most of them are going to be right at some point.
This does not mean you buy gold without research, just beware of the many opinions surrounding this precious metal.
So ignore the noise and concentrate on the main reason to own gold – protecting your wealth in retirement.
Tip #4 – Decide How Much to Invest in Gold
Don’t start by thinking about a specific dollar amount.
To one investor $100,00 could be a small amount, to another it is more than they have to invest.
Think about the percentage of your investment portfolio you would like to allocate to gold – to provide a level of protection (hedging) against a financial crisis.
As you might expect, there are wide ranging opinions on a suitable percentage.
- Some advisers do not like to hold physical commodities, they suggest zero of your portfolio is allocated to gold.
- Others suggest a small allocation of up to 2.5%.
- People who understand the risk management properties of gold often use 10% as their allocation figure.
- Gold bugs (a name for investors who whose belief in gold borders on the religious) may recommend a 10-50% allocation.
The super rich, who have many options in where to place their money, typically choose a 5% allocation to commodities / gold. See the chart below from Forbes:
Here is a range of opinions from other respected sources:
- Financial Times – Alphaville blog – how much gold should be in your portfolio?
- The Perth Mint – a useful article discussing gold allocation
- CNBC Jim Cramer Mad Money – how much gold to have in your portfolio
- Investment News – A 20% allocation to gold? Seriously.
- The Daily Reckoning – gold, the ultimate insurance
We like Jim Cramer’s Mad Money article from the list above. He does not talk about gold as an investment but as a hedge or insurance on your investments. Jim says:
“Owning gold is not about upside potential. It is about minimizing risk to the downside.”
Jim Cramer, CNBC
You should not be buying gold hoping it will rise in value. You are buying gold to provide your portfolio with a level of risk management.
How much do you want to, as Jim Cramer puts it, “minimize risk to the downside?”
A yardstick to begin with could be to invest between 5-10% of your retirement wealth in physical gold.
It will come down to your overall retirement plans, your risk tolerance and your use of other risk management measures such as insurance. We share our thoughts about protecting retirement savings on this page.
If you now have a percentage in mind and you want to invest in a Gold IRA, consider a minimum $10,000 investment. This makes the cost of holding the gold in a regulated, secure gold depository worthwhile.
To learn more about setting up a gold IRA, ask for your free gold investment guide.
Tip #5 – When Not to Buy Gold Bullion
When using gold as an insurance or hedge for your retirement, you will typically want to buy it at the lowest price. If the price of gold keeps falling, you can keep buying.
The idea being that when a financial crisis hits (and it will) the gold you own will rise in value, offsetting losses you may be experiencing elsewhere in your investment portfolio.
In a time of crisis, the price of gold typically rises as investors, government, wealthy individuals and companies look to move some of their cash or other assets into gold (a safe haven asset). This is not the time you want to start buying gold as a hedge against a financial crash.
You need to buy gold when there is low perceived risk in the market place.
How do you do this?
One way is to track the Volatility Index (VIX) which measures the market’s sentiment towards risk.
The lower the perceived risk, the more likely the gold price is going to be trending down or flat. It’s not an exact science but an important indicator to consider. Read more:
- ValueWalk – CBOE Volatility Index High Correlation with Gold?
- Futures Mag – VIX vs Gold, the ultimate battle between fear and greed
- Yahoo Finance – VIX chart
- CBOE – VIX Information
The height of a financial crash is not the time
to protect your portfolio.
You will most likely pay a much higher price for gold bullion during a crash than if you had bought gold in less volatile times. Remember, you have to buy insurance ahead of an insured event, you should do the same with gold.
Discuss the current market risk and sentiment towards gold with our recommended gold bullion dealer.
What to do Next?
We think it comes down to …
How do you plan to protect your retirement from financial crises?
A financial meltdown can wipe you out financially. Many retirees and investors still bear the scars of the GFC in 2007/8. You may be one of them.
When the next crash happens, what will you have done to prepare yourself?
Buying physical gold is a straightforward action you can take. Setting up a Gold IRA and protecting your wealth can be completed in a matter of days and weeks.
However you choose to protect your retirement, we wish you all the best.