Top 3 Reasons Seniors Should Consider Investing in Gold (and 3 Reasons to Avoid It)

While inflation has shown signs of cooling in recent months, as of the latest report, it was still 1% higher than the Federal Reserve’s 2% target rate. As a result, the Fed has kept its benchmark rate locked at a 22-year high. This, in turn, has kept the cost of borrowing elevated at a time when the price of consumer goods also remains high.  

Amid the current economic environment, many seniors are turning to gold to help hedge against the repercussions of high inflation. But while gold can help seniors protect their wealth while offering other unique benefits, a gold investment isn’t always the right solution. Depending on your circumstances and investing goals, there are times in which it makes sense for seniors to invest in gold — and other times when it may not make much sense. 

So when is investing in gold as a senior a smart move — and when should you avoid doing so? Here’s what you should know.

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3 times seniors should invest in gold

1. When you want to hedge against inflation

Investing in gold as a senior can be a smart way to hedge against high inflation.

“Gold is generally a hedge against very high inflation or a major credit event like we saw in 2007 and 2008,” says Doug Carey, certified financial analyst and president of WealthTrace, a retirement planning software solution. 

Seniors who want to protect against the pitfalls of these types of events might consider adding gold to their portfolio as insurance, Carey says.

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2. When you want to diversify your investment portfolios

Investing in gold can also reduce the risk of your portfolio, according to Carey. 

“Gold typically has a low correlation with other asset classes like stocks and bonds, meaning its price usually does not move along with those of traditional financial assets,” says Carey. In turn, he thinks this diversification [adding some gold to your portfolio] can help reduce overall volatility and losses in times of crisis.

That said, you generally shouldn’t put all of your retirement portfolio into gold. 

“I recommend no more than 5% for seniors since gold can be risky and produces no income,” Carey says. 

Rick Miller, a financial planner and investment advisor at Miller Investment Management, agrees. 

“As a diversification from an equity-heavy portfolio, gold has merit,” says Miller. That’s because, according to him, gold doesn’t move as the stock markets do. As a result, he thinks purchasing gold can help smooth out the overall return of an investment portfolio.  

3. When you want to hedge against market declines

Gold and other precious metals can also help protect your portfolio against market declines, experts say. That, in turn, could have utility as a means of exchange in severe economic conditions.

If hedging against market declines is your goal, Miller recommends 1-ounce gold bars as the asset to invest in. 

“They are small, easy to store, and function as a means of exchange,” says Miller. 

That makes these small gold bars the vehicle of choice when investing in gold for this purpose, according to Miller.

3 times seniors shouldn’t invest in gold

While purchasing gold as a senior can be beneficial, there are times you should avoid investing in this yellow metal, experts say. This includes:

1. When you need liquidity

While gold is considered a liquid asset in certain regards, investing in gold may not be the best option if you’re a senior who wants to invest in a highly liquid asset — meaning that you want to easily sell your investment for cash.

“Gold is not a liquid asset like cash or certain stocks, and converting it to cash quickly might mean getting a lower price for it than they can get later if they take more time,” Carey says.

That said, there are types of gold assets that offer more liquidity than others. For example, if you’re looking for liquidity and want some exposure to gold, you may want to consider purchasing gold stocks. In general, gold stocks may be more easily converted to cash, especially compared to certain types of physical gold.

2. When you have a small portfolio

Investing in gold may only make sense as a senior if you have a large investment portfolio, some experts say.

“Having a position in gold is probably most suitable for investors with a reasonably substantial portfolio since gold has not matched stock indexes for growth over time,” says Miller. 

3. When you need regular income

When you need income from your investments, there may be better investing options than gold, experts say. 

“Unlike dividend-paying stocks or interest-bearing bonds, gold doesn’t produce regular income,” Carey says.

Benjamin Hooper, certified financial planner, founder and wealth manager at Comal Wealth Management, has a similar perspective. 

“While gold is traditionally viewed as an inflation hedge, its effectiveness is often overstated compared to stocks. Unlike stocks, which benefit from economic growth and innovation, gold does not generate income or dividends,” Hooper says.

Gold prices can also be volatile, especially in the short term, Hooper says, because they can be influenced by factors unrelated to inflation. In turn, this could pose a risk for seniors who need reliable income during retirement.

The bottom line

Investing in gold as a senior could be a smart move if you want to hedge against inflation or diversify your portfolio to lower your risks, experts say. If you need regular income during retirement, though, you may want to consider investing more in other assets, like dividend stocks or bonds. 

“Keep in mind that gold does not perform as well as the stock market, so understand your objectives and act accordingly,” says Miller. 

If you need help figuring out whether adding a small percentage of gold to your portfolio makes sense, it could benefit you to consult a financial professional who can make recommendations based on your complete financial picture.