2024 has been a great year for the broader market, with all major indexes hovering around all-time highs.
After rising just 9% from 2021 to the end of 2023, gold has had a breakout year in 2024. With a year-to-date (YTD) return of 28.7%, gold is marginally outperforming. S&P 500:of (SNPINDEX: ^GSPC) 26.6% YTD gain.
Here are some factors that can cause it the price of goldgold can play a role in a diversified portfolio and different ways to invest in gold.
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Gold is a commodity, so the price can move based on several macroeconomic factors.
Lower interest rates could lead to lower capital costs and encourage investment in new projects for gold miners, boosting supply.
Central banks may decide to increase their gold holdings, leading to higher demand and prices The People’s Bank of China was the largest official buyer of gold in 2023. Sustained demand from China could support gold’s long-term appreciation.
Gold-based luxury goods and industrial processes using gold can also lead to higher demand for gold.
It’s also worth understanding how gold prices can vary based on the currency it’s denominated in. For example, a stronger U.S. dollar can mean a lower gold price in terms of the U.S. Here’s the S&P 500 over the past decade compared to the performance of gold in different currencies.
Gold may have underperformed the S&P 500 over the past decade, but not many other currencies.The US stock market has been stronger than many other developed country stock markets in recent years. For example, using Japanese yen to buy gold would be a better investment than investing in the Japanese stock market.
Assets can do almost anything in the short term, so there’s no telling how gold will fare against the U.S. stock benchmark over the course of a year. However, the S&P 500 will likely continue to outperform gold over the long term if it does The US economy continues to grow.
The S&P 500 has been a great long-term investment as the value of leading U.S. companies has increased. and due to the growth of global industrialization and consumption.
A bet against the S&P 500 basically means that the US will lose its edge on the global stage, or that factors affecting gold will lead to a sustained price increase that exceeds the S&P 500. For example, if gold production slows or central banks increase gold holdings, gold could outperform the S&P 500 even if The S&P 500 will post solid gains, however, for most investors it’s probably best to view gold as a small part of a portfolio rather than a dominant holding in the long term.
There are many ways to buy gold. You can buy gold jewelry or bullion. But it usually involves paying a premium on the spot and comes with security risks and possible storage fees.
There is also the option of investing in gold mining companies. Investing in gold miners or gold mining exchange-traded funds (ETFs) is a way to collect passive income from gold. However, gold miners often face geopolitical risks and must manage costs. to ensure financial stability. Gold miners can also be some unreliable forms of passive income. Newmont (NYSE: NO)which is one of the most valuable US gold miners by market cap, paid a dividend of $1 per share in 2024, up from $1.60 in 2023 and $2.20 in 2022, despite 2024 being the best year for gold prices since then. during the period.
Perhaps the simplest way to invest in gold is through a gold ETF SPDR Gold SharesETF:(NYSEMKT:GLD) and: iShares Gold Trust(NYSEMKT: JUNIOR) use custodians that hold gold on their behalf. Both ETFs charge annual expense ratios (0.25% for the iShares Gold Trust and 0.4% for the SPDR Gold Trust), but these fees can be worth it for the simplicity and liquidity benefits for investing in “digital gold” rather than physical bullion.
Including gold in a portfolio of other assets such as stocks, bonds, and high-yield savings can be a good way to achieve diversification. However, gold is not a good way to generate reliable passive income. Gold can also be difficult to buy and sell if you You don’t invest in a gold-based ETF.
The value of gold can rise over time based on supply and demand dynamics and central bank policy, while the stock market rises based on economic expansion and leadership in several sectors in the U.S. Investors who don’t own gold may want to take a closer look at the SPDR Gold Shares ETF or iShares Gold Trust, which can serve as major gold holdings without the security or liquidity concerns of buying physical gold.
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