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8 Reasons Retirees Should Probably Avoid Gold (And 3 Things To Invest in Instead)

Discover why retirees should think twice before jumping on the gold bandwagon.

By Michelle Smith

Edited by Eric McWhinnie

Updated Dec. 17, 2024

Gold is often recommended as a stable long-term investment that never depreciates in value.

If you're trying to start investing for your retirement, you might have considered purchasing gold bars. But how much is a gold bar worth, and is it actually worth it?

We cover eight reasons to consider steering clear of gold. We’ll also offer three alternative investments with better long-term payoffs that retirees should consider instead.

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Gold can be a volatile asset

Generally speaking, gold tends to maintain its value over time, but gold is much more volatile as a short-term asset.

For one thing, gold typically has an inverse relationship with the U.S. dollar. Gold usually costs less when the U.S. dollar is strong compared to other currencies, and vice versa.

For another, gold’s price changes dramatically depending on its physical supply and demand, which depends on gold-mining companies’ schedules and whether gold jewelry is in vogue worldwide.

As a retiree, you want low-risk, stable investments, not high-risk, volatile investments. If you want to keep your assets relatively safe in the short-term, then gold probably isn’t the right choice.

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Gold ETFs don’t pay dividends

Many people invest in gold through exchange-traded funds (ETFs), and while some ETFs pay dividends, gold ETFs don’t.

Since investing in gold isn’t a good source of passive income, it isn’t the best choice for retirees using cash flow from investments to boost their monthly Social Security checks.

You can consider investing in dividend-paying, gold-mining company stocks instead of gold ETFs, but stocks (especially gold-related stocks) are more volatile than stable bond investments. And depending on your age, they might not be suitable for your portfolio.

Gold has a high premium to purchase

ETFs have an actual value (the inherent value of the physical gold held by the ETF) and a market price (tied to how highly traders value gold at any given moment).

If the market is stable, these two values should be pretty similar — but that usually isn’t the case with gold, which is a more volatile asset.

Instead, gold usually trades at a premium, meaning you’ll spend more money than the gold is worth to invest in an ETF. Physical gold also has high premiums.

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Gold isn’t a useful commodity

Commodities like wheat, corn, and cotton have multiple uses and demonstrable real-world value. In contrast, gold is mainly considered valuable because humans like it, not because they need it (besides a small amount in some electronics).

Gold no longer officially backs any global currencies, and unlike other precious metals that are also used for jewelry, gold has limited industrial uses.

If gold suddenly falls out of fashion, it’ll lose nearly all its value — unlike silver, which can be used in several applications besides necklaces, earrings, and bracelets.

Gold is difficult to store

Instead of investing in gold ETFs or gold-mining companies, some individuals try purchasing gold themselves and storing it at home in hopes the gold will still be valuable if the U.S. dollar loses its value.

This is impractical for several reasons, but one of the most important is how inconvenient it is to store gold at home. You’ll need a secure location in your house that won’t draw attention.

Plus, you risk losing it if a disaster ever strikes your house. You’ll also worry about the gold at home when you’re traveling.

Gold can be stolen

Even though gold doesn’t have many practical uses, humans still consider physical gold interesting, valuable, and unique — which means having a substantial stash of gold at home can make you a target for thieves.

You’ll need to go out of your way to store your gold in a completely secure, out-of-the-way area in your home that only you and maybe one other trusted person know how to access. Frankly, for most people, the hassle and stress of storing gold just isn’t worth it.

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Gold can be taxed more as a collectible

Whether you own physical gold stored at home or invested in gold through an ETF, gold is typically considered a collectible by the IRS.

Collectibles are taxed at a rate of 28%, much higher than the 15% to 20% tax rate for capital gains.

Gold doesn’t offer the best return on investment

For all the reasons we listed above and more, gold isn’t the best option for reaping profits. Even if you profit from investing in a gold ETF or mining company stock, that profit is almost certainly lower than the return from other investments.

If you want to make your nest egg last as long as possible, consider looking away from gold and toward one of the following alternatives — each of which tends to provide a much better return on investment than gold.

Alternative: Stocks

Stocks are a riskier investment than bonds but yield greater rewards.

While you should move into less risky investments as you age, keeping some money in stocks (including dividend-yielding stocks) can help your savings account stretch further.

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Alternative: Bonds

Treasury bonds are some of the most stable investments you can make.

You’re practically guaranteed a return — which makes Treasury bonds the type of risk-averse investment you want if you’re in retirement or getting close.

Alternative: Real estate

Unlike gold, real estate has seemingly endless value in the real world. After all, even during more volatile economic times, there’s always a demand for housing.

Plus, while houses themselves don’t always appreciate over time, the land the home is built on almost always does.

Property could be more valuable than investing in gold bars or jewelry if you're looking for a physical investment.

Bottom line

Investing in commodities like gold can be crucial to a healthy, diverse investment portfolio, but it definitely shouldn’t dominate your portfolio. And steer clear of liquidating your investments in favor of purchasing gold.

Instead, talk to your financial advisor about how to make wealthy money moves as you get closer to retirement.

Personalized advice from a fiduciary expert is the best way to ensure you’re making smart financial moves that will help boost your bank account and make your savings last as long as possible.

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