As the value of gold continues to increase, investors are turning to this precious metal, often as a hedge against inflation. Gold’s valuation has increased over 21%¹ since the beginning of the year — surpassing $2,500 an ounce from mid-August,² and outpacing the S&P 500’s 14.7% YTD return.³  With 22% of Americans set on adjusting their investing strategies in 2024, some potential buyers may be eyeing an opportune moment.

Readying for a gold rush

Big-box retailer Costco began selling 1-ounce bars of 24-karat gold in August 2023 – just before investing in the precious metal hit an 11-year high.⁴ Now, Costco can’t keep gold on the shelves: The retailer is selling as much as $200 million in gold bars monthly and is limiting sales to two bars a buyer.⁵  

But it’s not just Costco getting in on yellow metal sales. Cookie delivery company, Tiff’s Treats, says they always believed their cookies are “as good as gold” – now they're taking things one step further, bundling chocolate chips with 24-karats in the “bullion bundle.” Customers can purchase 1 dozen warm cookies with a side of a 1-ounce gold bar for around $2,500.⁶

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Why is investing in gold on the rise?

It’s a hedge against inflation

Gold is traditionally used as a way to help maintain purchasing power, particularly as inflation has remained stubbornly persistent in recent months.

When inflation is high, the purchasing power of the dollar decreases. But the value of gold typically increases when there's a devaluation of traditional currency. So, by investing in gold, investors attempt to actively hedge against inflation.

It tends to perform well amidst uncertainty

Historically, the shiny metal tends to perform well during periods of economic uncertainty when investors may move away from riskier investments.

It can help diversify your investment portfolio

Gold can be a useful tool for portfolio diversification, as its price generally moves in the opposite direction of common investments like stocks and bonds.⁷ When these types of investments experience a downturn, gold may act as a counterbalance, with the aim of providing greater portfolio stability.

It’s highly liquid

Gold offers investors access to a relatively liquid trading market (and cash) even when other assets are declining in value. The estimated average daily turnover of gold is more than $162 billion, and even during turbulent markets it has stood the test of time: Gold trading volumes hit $237 billion in March 2020, during the early days of the COVID-19 pandemic.⁸ 

How to invest in gold

Adding to its current allure, gold is projected to hit $3,000 an ounce in the next 6 to 18 months.⁹

There are various ways to invest in gold, falling into two categories: physical gold and gold-related financial investments. While purchasing gold bars or coins is the most direct way to buy gold, these can be illiquid and must be stored securely. Financial investments in gold, such as gold stocks, futures, and funds, can be purchased in smaller dollar amounts, and are easy to buy and sell. Let’s look at the different options available for investing in gold.

1. Physical gold

Physical gold comes in the form of gold bullion (bars of gold), gold coins, or gold jewelry. Buying gold bullion is a direct investment in gold’s value, and each dollar change in the price of gold will proportionally change the value of one’s holdings. Though purchasing physical gold is the most direct way to invest in gold, it’s also the most challenging to buy, store, and sell.

2. Gold stocks

Investors might consider individual stocks, such as those for public companies that mine for gold (and other metals), to get indirect exposure to the price of gold. As the price of gold changes, so too can the value of these types of companies.

3. Gold funds

Investing in gold mutual funds means you own shares in multiple gold-related assets, like many companies that mine or process gold, but you don’t own the actual gold or individual stocks yourself. Gold exchange-traded funds (ETF) or mutual funds may be one of the simpler ways to invest in gold; these funds are offer greater diversification than investing in a single stock.

4. Gold futures

Gold futures are contracts that allow you to buy or sell a specific amount of gold at a specific price in the future. The contract itself is what is traded on an exchange. Futures contracts are generally more complex than stocks and can involve a great deal of risk.

The bottom line

Gold prices can be volatile, especially over the short term, so typically investors consider the value as a long-term investment. Before investing in gold, you may want to consult a financial professional to review your overall financial goals and help determine which investments may be right for you.