The number of Americans who feel gold is the best long-term investment nearly doubled from 2022 to 2023; more than a quarter (26%) now rank it above investment options such as stocks and bonds, according to a Gallup poll released earlier this year.
Gold has traditionally performed well despite economic challenges — rising during periods of high inflation and generally showing less volatility than many equity indexes and commodities, according to World Gold Council research.
Amid challenges such as the COVID-19 pandemic and inflation that reached 9.1% in 2022 — its highest point in two decades — as investors began to increasingly seek assets that might prove less risky than the stock market, the interest in precious metals escalated considerably, and gold prices have followed suit, according to Everett Millman, Chief Market Analyst at Gainesville Coins.
“We’ve seen, in just two or three years, gold has risen back up near its all-time highs,” Millman says. “Usually, when gold prices would rally, there’d almost immediately be this knee-jerk reaction for the price to come back down. That market behavior has a lot to do with people taking profits — if they bought low, they want to sell and lock in those profits. That has not happened as much lately; prices have remained really very close to those all-time highs.”
What’s Driving Gold Demand?
Gold possesses unique properties that allow it to be used in numerous applications. It’s one of the densest metals, according to Britannica, yet it’s also malleable, conducts heat and electricity well, and doesn’t tarnish or corrode.
As a result, the metal’s many utilizations range from semiconductor systems to dental fillings.
Central bank investment activity has also helped fuel the interest in gold. In 2022, bank-related purchasing shot up 152% from 2021, reaching a level, according to the World Gold Council, that hadn’t been seen since 1950.
The demand for other precious metals has also risen. Silver, for instance, has a number of industrial applications. It’s used in mobile phones, medical devices, and other electronic items. Silver is also a component in processes such as solar photovoltaic power production that are part of the rapidly growing clean energy sector.
In 2021 and 2022, the overall demand for silver increased, according to data from the nonprofit Silver Institute — which predicts silver demand will reach an all-time high this year, following the 5% growth it experienced last year.
How Precious Metals Can Fit Into Your Portfolio
With considerable demand and a strong track record, precious metal assets like gold — which the World Gold Council notes has historically generated long-term positive returns during both robust and lean economic periods — can be used to help diversify a portfolio and potentially offset losses from more inconsistent investments.
Investors, Millman notes, may choose to approach precious metal purchases somewhat like a savings account, viewing the gold, silver, and other assets they obtain as extended investments to help preserve their wealth.
“If you are thinking about estate planning, gold and silver are something you could physically pass on to your children or grandchildren,” the Gainesville Coins specialist says. “It’s not going to disappear; it’s not going to go anywhere.”
For investors concerned about the permanency of paper assets, precious metal assets’ physical nature may also provide additional comfort.
“Sometimes things go wrong; pensions go under,” Millman points out. “Anyone who lived through the last financial crisis in 2008 probably still has strong memories of that. One day, they thought they had all this money for their retirement and then the next, it [was] gone. You don’t have to worry about that with precious metals. The peace of mind of ‘this is something that’s always going to hold its value’ is an important thing for investors to keep in mind.” For more information on precious metal based investing be sure to follow Gainesville Coins on Twitter.