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Should gold investors add more to their portfolio as the price rises?
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This has been gold’s year. The precious metal has been on a tear in recent months, outperforming many other asset classes by a landslide. Case in point: Forecasts project stock market gains of about 9.3% for the year. Meanwhile, gold prices have jumped by over a whopping 35% since the start of 2024 alone.
The reasons for the yellow metal’s performance are many — high (but now cooling) inflation, geopolitical tensions and economic uncertainty as we head into a new presidential administration among them. But does it still make sense to keep investing in gold with prices up so much? And should you consider adding some to your portfolio as we close out the metal’s record-breaking year?
Get started with gold investing today.
Should gold investors add more to their portfolio as the price rises?
Here’s what experts have to say.
Yes: Prices could keep climbing
Experts say buying in — even despite gold’s currently high price — is worth it right now since gold prices could very well keep rising.
“Nobody knows where gold prices will go next, though we argue that it’s a bull market again,” says Keith Weiner, CEO of Monetary Metals. “Investors who wait are risking being priced out of owning gold.”
Another thing to think about is your investing goals. If having some gold in your portfolio to diversify and protect against losses in other asset classes is important, you might find that hard if prices rise too much.
As Weiner puts it, it could be “challenging to accumulate enough ounces for meaningful diversification or income generation.”
Start adding gold to your investment portfolio now.
Yes: It can safeguard you in a recession
With the Federal Reserve making policy moves and a change to the presidential administration, there’s a lot of economic uncertainty in the country. According to research, there’s a good chance of a recession, too. (The chances of a recession by the end of 2025 are estimated at 45% currently.)
Gold can be a smart way to protect your wealth in a recession and ensure it retains its long-term value.
“Gold does well in times of chaos, fear, political turmoil, wars and inflation,” says Mike Chadwick, president of Fiscal Wisdom Wealth Management.
How much should you buy to protect against a potential recession, though? Eric Elkins, CEO of Double E Financial Solutions, says somewhere between 5% to 20% of your portfolio is smart — though some other experts suggest limiting your gold allocation to 10% or less.
“Gold has been a consistent overachiever during recessions,” he recently told CBS Moneywatch.
Yes: You can monetize it now
Finally, buying gold today allows you to start benefitting from that investment. As Weiner puts it, “The sooner you buy gold, the sooner you can put it to work.”
That can mean earning returns as the price of gold rises, or leasing or lending it out, as Weiner’s company offers.
“The opportunity cost of missing out on earning a yield could outweigh any potential benefit from a slightly lower entry price,” Weiner says. “In other words, the cost of waiting might be greater than the savings on the price of entry.”
The bottom line
If you’re ready to invest in gold, there are many ways to do it. You can buy physical gold bars and coins, buy gold stocks and ETFs, or open a gold IRA (just make sure you compare gold IRA companies first). If you’re not sure of the best route to take, talk to an investing professional. They can point you in the right direction.
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While another Federal Reserve rate cut issued this week won’t be great for savers accustomed to earning high returns on their money, it will provide another boost to borrowers. Whether you were considering a mortgage, a personal loan or even just a credit card, a reduction to the federal funds rate helps, even if the amount of assistance will vary depending on the product.
One way it will help, perhaps in a significant fashion, however, is with home equity loans and home equity lines of credit (HELOCs). Because the home serves as collateral in these borrowing exchanges, rates on both items tend to be lower than other credit options. And with rate cuts now issued twice in the last three months, they’re poised to become even less expensive.
Still, home equity borrowing comes with some inherent risks, too. And borrowers should do all they can to avoid them. As such, there are some smart home equity moves to make now that the Fed has cut rates again. Below, we’ll break down four of them.
Start by seeing what home equity loan rate you could qualify for here.
4 smart home equity moves to make now that the Fed cut rates again
Rate cuts offer prospective home equity borrowers a unique chance to capitalize on their accumulated home equity, but they should approach this chance in a strategic and nuanced way. Specifically, they should consider the following moves now:
Monitor certain dates
If you opened a home equity loan at the start of this week and didn’t wait for the Fed to take action then you likely made a mistake. While the difference in rates over a few days was likely minor, every little bit helps, particularly when spread over an extended repayment period. It’s critical to monitor certain dates — like those surrounding a Fed rate cut or the next inflation report release — for opportunities to capitalize and to lock in a below-average rate. Fortunately, there are multiple upcoming dates in which borrowers can take advantage. But this will require a proactive approach and you’ll need to have your documentation ready and credit score in top shape to truly take advantage.
Explore your current home equity borrowing options online today.
Consider a HELOC over a home equity loan
A HELOC has a variable interest rate subject to drop now that the Fed has embarked on its new rate-cutting campaign. A home equity loan, meanwhile, has a fixed interest rate that will need to be refinanced in the future to exploit any rate declines. In today’s evolving rate climate, then, it’s worth considering a HELOC over a home equity loan, even if the latter’s current rate is slightly better than the former. Plus, HELOC rates will change independently each month on their own while home equity loan borrowers will need to pay closing costs to refinance their rates.
Don’t overborrow
It’s been a long time since rates were cut (September’s reduction was the first in more than four years). So it can be tempting to overborrow now that rates appear to be moving in the right direction. But that’s always a mistake, particularly when using your home equity. So avoid that temptation and crunch the numbers to make sure you’re only borrowing an amount that you can easily afford to repay.
Open it before the end of the year
Not sure if you should wait for home equity rates to fall further into 2025? If you’re planning on using the home equity for a home improvement project, you may want to open it before the end of the year, even with the possibility of additional rate cuts high right now. That’s because the interest on both home equity loans and HELOCs is tax-deductible if used for qualifying home repairs. If you wait until 2025, however, you’ll postpone this critical tax deduction until it comes time to file your return again in 2026. So consider opening it now, then, to position yourself for potential (and immediate) tax relief.
Learn more about your home equity loan options here.
The bottom line
Now could be a great time to access your home equity, with two rate cuts already issued this year and others likely in the near future. Borrowers should still take a smart approach, however. That involves monitoring certain calendar dates for opportunities to capitalize on a lower rate, considering a HELOC over a home equity loan, not overborrowing and opening it at the right time to potentially qualify for some specific tax benefits. By making these four smart home equity moves now, borrowers can better position themselves for financial success both in today’s cooling rate climate and over the full repayment period.
