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Is it time to buy gold?

Old fashioned scales weighing two gold bars in front of dark background, gold share price, newcrest mining share price
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Is it time to buy gold?

Gold is one of those things that’s hard to get a grasp on. Is it a store of wealth? Should you trade in and out of it?

For thousands of years gold has been a way for people to store money and generally avoid losing wealth to inflation.

In recent months the gold price has been rising higher and higher as people seek safety for their capital away from coronavirus impacts.

Time to buy gold?

You can end up ‘buying high’ with gold as well as shares. And how are you going to get that exposure to gold? Buy gold bars yourself? It would just sit there not earning you any cashflow. Is a gold exchange-traded fund (ETF) the answer? Maybe. There are questions raised about the actual underlying gold through ETFs.

Over the short-term gold can be a strong performer. But it’s very hard to know when to buy and when to sell. If you knew that you could invest in shares and receive dividends and benefit from much stronger compounding.

If you want exposure to gold you could go for an ASX gold mining company like Newcrest Mining Limited (ASX: NCM), Northern Star Resources Ltd (ASX: NST) and St Barbara Ltd (ASX: SBM).  

I’m not a gold miner investor but if it’s time to buy gold I’d probably go for Evolution Mining Ltd (ASX: EVN) which could provide a solid dividend and it has good cashflow. Gold miners are really benefiting from the lower Australian dollar at the moment.

The problem with owning gold miners is that you face mining risks and the limited life of mines. Just like any other resource business. 

If inflation is to return strongly from all of the central bank support then gold could be a good way to protect against that as well.

Foolish takeaway

Gold is an interesting one. It could be a decent time to buy gold and form part of a portfolio to hedge against market falls and inflation. But the gold price is now so high I’m not sure how much further “upside” there could be at this price. I’d rather buy good value ASX shares for my portfolio that are at lower prices.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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