Gold is an asset that many like to own for inflation protection. Rising prices tend to erode the purchasing power of a currency like the U.S. dollar while gold generally increases in value over the long term. Owning gold—like in a gold IRA—can help investors maintain the value of their portfolios and build their assets as well as hedge against volatile markets. 

“Gold has intrinsic value and tends to retain its worth over time, making it a stable store of value during economic uncertainties,” says Dennis Shirshikov, a finance professor at City University of New York. Gold can also be a good investment because of its liquidity, according to Shirshikov, since the asset “can be easily bought and sold in the market.” 

Historical gold price 

Gold is a favored option for protecting against inflation. When the costs of goods and services increase, the purchasing power of the U.S. dollar (and other currencies) usually declines. During these times, gold often gains value over time. By investing in gold, investors can maintain the value of their portfolios, enhance their assets, and protect themselves from market volatility.

Over the very long term, gold has a significantly lower average annual return than stocks. From 1971 to 2024, the stock market delivered average annual returns of 10.7%. Gold delivered an average annual return of 7.9% over the same period.

What does “spot gold” mean? 

The spot gold price represents the current value for purchasing or selling gold in over-the-counter transactions. By keeping an eye on the spot price, investors can gain insights into investment trends and the demand for gold. An increase in the spot price indicates a rise in demand. In contrast to futures contracts, which are agreements for transactions at a later date, the spot price specifically relates to immediate sales.

The spot price can be either lower or higher than the futures price. When the spot price is lower, this is known as contango, which often occurs with commodities that carry high storage costs. On the other hand, when the spot price exceeds the futures price, it is termed backwardation. Analysts believe that market prices will eventually converge with futures prices.

Various factors, including supply and demand, influence the spot price, resulting in frequent fluctuations. Investors should be prepared for continuous price changes when investing in gold.

What is price spread in gold trading?

A price spread is the difference between the buying price and the selling price of an asset.

Gold functions in a comparable way: the offer price, also known as the ask price, is the amount needed to purchase gold, reflecting the investment cost. Conversely, the bid price is what you would get when selling the gold. Typically, bid prices are lower than ask prices.

A smaller spread suggests a more liquid market. Investors may feel more confident with narrower spreads, as they indicate a rising demand for gold.

How to invest in gold 

According to fee-based financial advisor James Taska, gold can be purchased as a physical asset or as a securitized product. “There is a great debate as to whether paper gold is as useful as the physical,” he says. “From a financial advisor’s viewpoint, it is much easier to rebalance a client’s allocation of gold if it is owned as an exchange-traded fund (ETF), and the spread when attempting to buy/sell gold can be quite variable and wide.” 

There are many ways to buy gold. You may decide to create a gold IRA. Here’s how you can invest in gold:

• Gold bars: Known as bullion, many investors choose this option when investing in gold. You can buy it per gram or ounce, and the purity, weight, and manufacturer should be stamped on the face of the bar. 
• Gold coins: These are collectible coins, such as the American Gold Eagle coin. Because they are collectibles, they may be bought for a premium over the weight amount of the gold. 
• Gold jewelry: Because people buy jewelry for its aesthetic value as well, the price may be significantly more than the value of the gold’s weight. 
• Gold futures contracts: A futures contract states that the investor will buy a specified amount of gold for a defined price at a future date. Futures allow investors to speculate on the price of gold in the future without handling the actual physical product. 
• Gold funds: These are mutual funds or ETFs that own gold assets. You can purchase shares in gold funds or any other mutual fund investment, and their value fluctuates based on the changes in the underlying portfolio of assets. 

Is it a good time to invest in gold?

According to Taska, an “allocation to gold should really be considered on a case-by-case basis.”  However, Shirshikov notes that “diversifying a portfolio with gold can reduce overall risk and volatility.” 

Because we are living in inflationary times, many investors are looking to diversify their portfolios with gold. Many find that gold offers stability in a highly volatile period for the stock market. Prices have risen to an all-time high since inflation took off over recent years, and J.P. Morgan expects prices to continue to rise to an average of $2,500 per ounce by the end of 2024. Many experts agree this is a good time to diversify your portfolio with gold. 

Current precious metals prices as of 9 a.m. ET today

Along with gold, silver, platinum, and palladium are popular precious metals that investors hold in portfolios. When it comes to volatility, gold is less volatile than silver. Silver can have major price swings on any given day. However, silver is more sensitive to economic changes because of its vast use in many industries. 

Platinum and palladium also have high industrial uses. Investing in these rare metals is another way to diversify a portfolio, although these metals do fluctuate widely. This can give investors an opportunity to capitalize on speculative profits. 

The takeaway 

The U.S. economy has been in flux for several years now, and inflation has affected all households. Investors can use gold as an inflationary hedge in their portfolios. There are many ways to purchase gold, making it an easy asset to accumulate based on an investor’s comfort level and interest. You can buy gold in an IRA or a nonretirement account, fitting into both short—and long-term investment objectives. 

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