o3 BLOG | Investing

Investing in Gold in 2022 — An Easy Way to Safeguard Your Portfolio

January 31, 2022

O3 Mining

Why Investing in Gold is an Easy Way to Safeguard Your Portfolio

Investing in gold 2022 — Investing in gold is a common way investors safeguard their portfolio, as it is the ideal safe-haven asset during times of economic uncertainty and turmoil. And while we witnessed the economy reeling from the impact of the COVID-19 pandemic over the past two years, this sentiment has never rung truer. As investors look for safe investments with low risk, precious metals like gold are proving their worth as a mainstay in investment portfolios. Over the course of a two-year of highs and lows, the gold market saw double-digit growth, which outpaced gains in other markets. Following decreased mining operations to comply with new safety rules and regulations due to COVID-19 in 2020, increased scarcity of gold pushed its demand even further. Often considered the best hedge against inflation, gold holds its value when risks are high in other markets. 

 

Ways to Safely Invest in Gold

While there will always be long-term gains on physical gold such as collectible coins, gold bars and jewellery, there are several other ways to invest in gold products. The appeal of the physical commodity is that it is tangible and is not related to different market stocks, bonds, or real estate. However, things to consider can include the offsite storage cost for gold bullion and the possibility of security risks.

 

Investing in Gold Stocks and ETFs

Gold ETFs

Unlike actual gold, you can buy gold ETFs on a stock exchange just like stocks. ETFs can offer a more convenient option for investors to gain exposure to gold without incurring the costs and hassle associated with markups, storage fees, and security risks associated with physical gold. Investors need to consider that ETFs come with an expense ratio — in other words, they will lose a percentage of the value of their investment as a recurrent annual fee to cover management and administrative expenditures. The value of ETFs moves with gold’s valuation on the market. Like any other investment, be sure to perform your due diligence before investing in gold ETFs.

 

Gold Mining Stocks

Investing in gold mining stocks can effectively diversify your portfolio, offering security against inflation market turbulence and political and economic upheaval. Because gold is a scarce commodity that offers a long-term store of value, investing in companies that produce the precious metal will also generate long-term returns. Further, gold miners can use the cash flow generated by their operations to enhance production, pay dividends, and repurchase shares. These investments and shareholder returns position gold mining businesses to generate potentially higher overall returns than gold’s price appreciation and perform better than ETFs.

 

Gold Stocks are Less Volatile

The price of gold has jumped exponentially over the past two years — and while gold seemed like it lost steam in 2021, gold steadily closed above US 1800 in January of 2022 — a 51.31% increase over five years and an astounding 536.14% increase since 2000. 

Investors turn to gold when fiat currency is weak, namely, the US dollar, inevitably increasing its price. The price of gold nearly tripled between 1998 and 2008 during the financial crisis, reaching the $1,000/oz milestone. When supply chain shortages skyrocket the cost of goods, gold prices will continue upward amid high inflation rates. Gold retains its value during periods of financial uncertainty and political turmoil — add to that a pandemic that impacted global markets. As demand increases, so will the opportunities for equity return in gold mining stocks.

 

Bottom Line

The price of gold rose steadily in the late 2000s and outperformed the S&P 500, and that trend could happen again with global markets in flux. Analysts expect the price of gold to increase significantly in 2022, potentially reaching $3,000 by the end of the year. According to Yahoo, we saw similar activity in 2005, suggesting a wave of investment could occur close to year-end. 

Gold boasts some of the highest liquidity in the commodity markets and historically holds value over time. By maintaining a diverse range of assets in your portfolio, including gold stocks, you can effectively secure your investments should the unexpected arise. Emerging markets and tech are producing a new pool of investors, fuelling gold demand. Market experts predict demand to considerably outpace supply, making gold stocks a secure haven for investors interested in alternative assets.

 

Sources: 

https://o3mining.com/articles/why-gold-is-the-best-investment-for-millennials-in-2021/

https://ca.finance.yahoo.com/news/gold-price-prediction-2022-115924758.html

https://www.marketwatch.com/story/gold-prices-turn-higher-aim-to-snap-multiday-skid-11642598669

https://www.forbes.com/sites/theyec/2021/01/13/how-precious-metals-have-performed-during-coronavirus-a-year-in-review/?sh=14f556eeb171

https://www.kitco.com/gold-price-today-usa/

To learn how O3 Mining can add long-term value to your portfolio, contact us today.

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    What a year it has been! I want to personally thank you for supporting O3 Mining throughout this unprecedented time. At O3 Mining we experienced a year of tremendous growth as our exploration campaigns surpassed all expectations and we invested significant capital into our projects.

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