What is a good amount of gold?

The traditional financial advice is that gold should comprise 5 to 10 percent of assets, or 10 to 20 percent if home equity is not included. But this gold standard didn't last forever. During the 1900s, there were several key events that eventually led to gold's transition out of the monetary system. In 1913, the Federal Reserve was created and began issuing promissory notes (the current version of our paper money) that could be exchanged into gold on demand.

The Gold Reserve Act of 1934 gave the United States Government title to all gold coins in circulation and ended the minting of any new gold coins. In short, this act began to establish the idea that gold or gold coins were no longer needed to serve as money. It dropped out of the gold standard in 1971 when its currency stopped being backed by gold. To determine gold's investment merits, let's compare its performance to last year's S&P 500 (as of March 202. Gold performed better than S&P 500 during this period, with the S&P index generating around 10.4% in total returns compared to gold, which returned 18.9% during the same period.

The point here is that gold is not always a good investment. The best time to invest in almost any asset is when there is negative sentiment and the asset is cheap, which provides substantial upside potential when it returns to favor, as stated above. It may be easy for investors with a limited budget to get carried away by the idea of buying gold, thinking that the minimum amount to buy gold should be in the thousands.

Celeste Provent
Celeste Provent

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