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Gold’s price has climbed to record-breaking heights this year, achieving its highest point in history in February. The precious metal has crept up past $2,900 per ounce this year, leading investors to wonder if 2025 will be the year gold’s price surpasses $3,000 mark for the first time.
The metal’s price increase has to do with a convergence of factors, such as inflation, a weakening dollar, and economic uncertainty. As those three factors (among others) have emerged this year, investors have added gold to their portfolios, taking advantage of its long-held status as a safe-haven asset.
As demand has increased, so has gold’s price, which may leave you wondering if there’s an advantage of buying gold even as it nears $3,000 for the first time. After all, no investor wants to pour money into an asset that will stumble downward after reaching all-time highs. Below, we’ll help you understand why buying gold is a good idea right now and what drawbacks you may face after you buy it.
Ready to invest in gold before it hits $3,000? Explore your options here.
Gold investing pros to know as the price rises
Not sure if now is the time to invest in gold? Here are two reasons why it can still be:
It remains a hedge against inflation
Worries over inflation persist as investors and economists await the results of the Bureau of Labor Statistics’ (BLS) March 12 inflation report. If the report shows that inflation rose in February, gold’s price might continue its upward trajectory. Even if the report shows that inflation remained at 3% or declined, inflation will likely remain above the Fed’s 2% target. As a result, gold may still have value for investors who want the security of gold’s traditional role as a hedge against inflation and a weakened U.S. dollar.
It provides balance for your portfolio
There’s a lot of uncertainty over the economy heading into the spring. Experts aren’t certain where inflation is going, rate changes are up in the air and investors are wary of the stock market’s future. These conditions tend to push investors to gold, as it’s long been seen as a protective asset in times like these. So, even though gold’s price remains near its record high, it may still be worth it to add it to your portfolio as a steadying presence if inflation rises or the stock market slides into period of decline.
Gold investing cons to know as the price rises
And here are two drawbacks to investing in the metal as it heads toward the $3,000 price point:
Price volatility is a possibility
While gold tends to be a stable investment during volatile economic conditions, the price can be a bit volatile because it is based on a series of factors such as interest rates, the value of the dollar, geopolitical developments and central bank monetary policy.
Changes in any of those areas might lead to a drop in gold’s price. So, while the metal may serve you well as an inflation hedge right now even though its price continues to rise, there’s no guarantee that its price will keep climbing because of how murky the future of inflation, interest rates and the economy are right now. Additionally, what gold has done recently is no guarantee of its future performance.
That being said, gold is an asset meant for a long-term investment strategy, not as a way to generate short-term returns.
It doesn’t produce income
Even though the price of gold keeps rising, it’s important to remember that gold doesn’t generate dividends or interest payments like you’d get through stocks and bonds, respectively. Considering how high gold’s price is right now, it may not be worth it to you to buy the precious metal with no guarantee of income as you’d get from stocks or bonds. However, if your goal is to hold gold for the long run, then a lack of dividends or interest may be worth it in exchange for the stability gold typically brings to a portfolio.
The bottom line
Gold’s record pricing over the past year makes it a tempting investment for those who want to stabilize their portfolio and hedge against any future inflation increases. There’s a lot to like about gold if you want a safe-haven asset, but its lack of dividends and interest are a drawback for those who looking for reliable returns. As you consider buying gold, review its pros and cons to ensure it’s the right investment choice for your financial goals. If you decide to buy, experts suggest limiting your gold exposure to 10% or less of your portfolio.
