Perhaps the main advantage of a gold IRA is that it provides unique risk management capabilities for retirement investors. As we near our target retirement date, we must manage risk accordingly. In particular, it’s important to reduce the chances of losing our financial resources when we need them the most—during retirement.
A simple stock market downturn or overnight sell-off could delay your retirement by years if you’re overexposed to stock market volatility. Knowing this, many investors nearing retirement choose to diversify their holdings to minimize their exposure to stock market risk.
The underlying premise is that gold has a low correlation (about ~0.25) to the stock market. Therefore, it functions as an extremely useful hedge against stock market volatility. Statistically, gold bullion markets stand strong when the stock market rises or falls in value, thereby fortifying an investor’s portfolio from erratic swings.
Why Gold?
Gold has a long history as an investment and, more than that, as a reliable store of value. Dating back to 550 BC during the reign of King Croesus in modern-day Turkey, gold has been used to mint official coins and serve as a medium of exchange.
Given gold’s unique properties as a scarce, ductile, reflective, brilliant, and malleable metal, it has long been considered a prized commodity throughout the world. On top of that, its thermal and electric conductivity make it highly coveted as a modern industrial asset.
For retail investors, gold has come to be regarded as a disaster hedge. When the U.S. stock market experiences sustained downturns, the spot price of gold tends to perform positively.
