Sun. Jun 13th, 2021

Use your SMSF to take advantage of the Gold Rush

There aren’t a lot of investment that are as polarizing as gold and cryptocurrency. The latter has only been around for a couple of years and has created much debate over how we view money how we treat it. People have been looking at currencies in a different way since Bitcoin came onto the scene but gold has been around for millennia. No one can dispute the value it has and why it is important in the grand scheme of things. Gold has held its power over countries and economies for years. The rich have always known the importance of owning some gold and the wealthy billionaires understand the importance of having this yellow metal in their portfolios.

The Billionaire hedge fund manager, Ray Dalio has been pro-gold for a long time, saying that everyone should have gold in their investment portfolio because of the lack of better alternatives to hard currency or money as we know it. For Dalio, anyone who knows the history of gold will understand the importance of having it in their portfolios. And this brings us to the reason why anyone saving for retirement would want to consider SMSF gold bullion.

Various people hold different, but often philosophical views about investing in gold. The facts are easy to find. If we are looking at gold purely from a financial point of view, it is not an asset hat is easy to value but that does not stop a lot of financial market commentators from speculating about where the price of gold might be headed or not.

Like most other commodities, gold is subject to supply and demand. The supply of gold is limited. Unlike other metals, gold is not an industrial metal.   Gold does not power electronics but it is used in the manufacture of things like smartphones which we have come to rely on more and more these day. Gold isn’t used in construction or any industry that seems essential. Gold is mostly used in the jewellery industry and in investments. So, when most people go out to buy gold bullion, they aren’t doing so for any other major use than pure investment purposes.

Gold might be unable to generate cash flow in the short term, deciding to get SMSF gold bullion for the long-term could be the best decision you’ll ever make. Like any commodity that is traded, it will lose its value now and again but it can weather the worst economic storm. Just ask the people of Venezuela or any country that has experienced a serious economic crash – most wish they has invested in gold.

Unlike the shares market, gold investments do not generate dividends or regular cash-flows. So, if you decide to invest your SMSF in gold bullion you should not expect to draw dividends or an income. Instead, the total sum of what gold would have allowed your fund to generate will only become available when the Superannuation comes full term – at retirement.

SMSF funds in Australia can gain from the strength of gold, as a hedge and safe haven investment in the face of a failing economy and weakening currencies.

The performance of gold in the face of adversity

  • 2020 was a trying time, however gold managed to perform better than most investments in Australia and globally. Gold recorded return of 62% at the height of the COVID-19 crisis, reaching highs that had not been seen before in a short space of time.

 

Gold outperformed a lot of investments and did so much better than most global shares when the entire global economy was plummeting because of COVID-19.

  • Gold has a negative correlation to stocks and other shares. It moves in the opposite direction. Thi also means the yellow metal can reduce risks. A low risk is important to anyone who is looking for a long term investment strategy like self-managed Superannuation funds.
  • Gold is seen as safe haven investment. Having it, will cushion your investment portfolio against falling share markets and unstable economies. In the past, everyone though government bonds were safer, but when you consider the amount of debt major countries like the U.S are labouring under mounting debt this Is no longer the case. Government bonds are not as safe as they used to be.
  • No matter what anyone says, owning gold is still a smart investment choice. So, despite your reasons for investing or the risks associated with that, gold remains the best portfolio diversifier in the world. I