Gold prices are dropping. Here are 5 good reasons to invest now. (2024)

As an investment, gold has been in the spotlight recently — and for good reason. In addition to the unique benefits gold offers to investors, gold prices were also on the upswing during the final months of 2023, making it even more alluring to potential investors.

And, the focus on gold only accelerated when the price hit a record high of $2,100 per ounce in early December 2023. That, in turn, prompted even more investors to add gold to their portfolios, further boosting its value.

But it appears that trend may be reversing course a bit. This week, gold hit a one-month low when the spot price dropped to just over $2,008 per ounce — due in large part to strong economic data and lower market expectations. And, while a price decline like that could make you second-guess adding gold to your portfolio this year, it actually makes a lot of sense to invest in gold now that prices are down.

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Here are 5 good reasons to invest in gold as prices drop

There are a few reasons why it makes sense to put money in gold now that prices are dropping, including:

The attractive price point

Buying low and selling high is a solid investment strategy, no matter what the asset is — and that includes gold. And, while gold's price had been climbing over the last few months, the recent decline in gold prices could offer an attractive entry point. After all, gold's value tends to reliably increase over the long term, so the opportunities to buy low are typically limited.

In turn, any dip in price can present a good opportunity to add gold to your portfolio for less than what you'd normally pay. And, historical trends show that it's likely that gold prices will eventually find support and show signs of a potential upward trajectory. So, those who invested during the downtrend could position themselves for substantial gains as the market sentiment shifts.

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The historical price resilience

Throughout history, gold has weathered various financial crises and economic downturns, emerging as a reliable asset that retains its worth when other investments falter — which is a large part of why so many investors are drawn to it.

And, despite the recent dip in prices, the historical resilience of gold suggests that it may also be poised for a rebound in the near future. So, investors who understand the cyclical nature of markets may view the current downturn as a strategic entry point to capitalize on potential future gains.

The diversification benefits

Diversification is a key principle of a sound investment strategy. While traditional asset classes like stocks and bonds are subject to market fluctuations, gold often exhibits a low or negative correlation with these assets. This means that when other investments face challenges, gold may act as a stabilizing force in a well-diversified portfolio.

And, with prices currently on the decline, investors have the opportunity to add this precious metal to their portfolios at a more favorable entry point, enhancing diversification and potentially reducing overall portfolio risk.

The safe-haven qualities

The world is no stranger to economic uncertainties and recent geopolitical tensions and trade disputes have only heightened economic concerns among investors. But during times of uncertainty, investors often turn to safe-haven assets, and gold historically fulfills that role.

So, the current geopolitical landscape, along with the ongoing economic challenges, creates an environment where gold's safe-haven status becomes even more valuable. And, by investing in gold now, this move could position you to benefit from a potential surge in demand if today's global uncertainties persist.

Its role as an inflation hedge

Inflation has a direct impact on the purchasing power of currencies, and many investors will, in turn, seek ways to protect their wealth from its erosive effects. Gold has traditionally served as a hedge against inflation, as its intrinsic value tends to rise in tandem with increases in the general price level.

And, while it had appeared that the inflation issues were being tempered in recent months, the most recent inflation report showed a slight uptick in the inflation rate. As such, the allure of gold as an inflation hedge could become more pronounced — especially if the inflation rate ticks back up in the future. So, investing in gold while prices are down could prove to be a strategic move if you're looking to safeguard your portfolio from the eroding effects of inflation.

The bottom line

While investing always carries inherent risks — no matter what the asset is — strategic investors typically understand the importance of identifying opportunities in market downturns. And, the current decline in gold prices presents an intriguing chance for investors to diversify their portfolios, hedge against economic uncertainties and potentially benefit from a rebound in prices. As always, though, it's crucial that you conduct thorough research and assess your needs, goals and risk tolerance before making any investment decisions — which includes adding gold to your portfolio.