Find Out How Lear Capital Can Help if You’re Looking To Diversify Your Portfolio

Since 2015, stock market returns have varied, ranging from more than 28% to minus 18.04%, according to The Motley Fool. Physical precious metals, though — such as gold and silver — have generally performed consistently, retaining or rising in value over time, according to Kevin DeMeritt, founder and chairman of Lear Capital.

In the past 19 years, National Mining Association records show gold’s price has increased on an annual basis by more than $782.

A number of factors can sway publicly traded companies’ stock prices, such as economic conditions and the current interest in a sector or product.

Less-robust-than-anticipated jobs data, for example, or an uptick in inflation can visibly affect stocks. Because economic and other elements that influence the market are constantly changing, definitively knowing when a shift in a stock’s price will occur can be challenging.

Conflicts between countries and other significant world events can also impact the market.

Stocks in the travel and leisure and other industries tumbled after Russia invaded Ukraine in 2022, according to U.S. News & World Report. An analysis of 20 major geopolitical incidents — such as the attack on Pearl Harbor and President John F. Kennedy’s assassination — found the S&P 500 stock index declined by 5%, on average, when each occurred, according to data from LPL Financial.

With the ongoing conflicts between Russia and Ukraine and Hamas and Israel, in a survey conducted by global asset management company Natixis Investment Managers, institutional investors identified geopolitical bad actors as the top macroeconomic threat in 2024.

When past global or other issues have made stock volatility a concern, investors have often shown an interest in historically less volatile assets like gold.

“Gold has an inverse relationship to stocks and other types of assets,” Kevin DeMeritt says. “Gold has outperformed the stock market since 2000.”

Investing in Precious Metals

In the past 23 years, gold’s value grew a whopping 490%, according to Lear Capital research.

Numerous investors have chosen to include the precious metal — and others — in their portfolio to help reduce their exposure to risk. If assets such as stocks unexpectedly drop in value, gold’s historical performance suggests it may be able to buffer some of the losses.

As former Federal Reserve Chairman Ben Bernanke once said, a number of people obtain gold as “protection against … really, really bad outcomes.”

Physical gold and other precious metals can be held in a self-directed individual retirement account, a type of account that also allows you to include other alternative assets, such as real estate, in addition to stocks, bonds, and mutual funds.

Much like a traditional IRA, precious metals-backed self-directed IRAs offer tax benefits. Contributions are made on a pre-tax basis, and taxes are deferred until distributions are taken.

Precious metal items, which can include coins and bars made from gold, silver, and other metals, have to meet certain purity requirements to be included — gold items must have a precious metal content of at least 0.995, and silver assets need a fineness of 0.999 or higher.

The government also requires precious metals that are part of an IRA to be kept in an IRS-approved vault, such as the Delaware Depository, the facility where Lear Capital arranges for its clients’ precious metal assets to be stored.

Lear Capital arranges for the items you purchase to be securely shipped directly to the facility for safekeeping. The depository insures the assets for their full value, in the event an incident such as a fire or flood were to happen and cause physical loss or damage.

A Positive Outlook for Precious Metals

Some investors view stocks as a type of short-term investment with the potential to provide considerable returns — although also possibly sizable losses. Some regard precious metals like gold as a long-term portfolio inclusion that can help them weather market uncertainty.

Research suggests a diversification-oriented approach can be beneficial. Retirees who received income from sources such as pensions or investments are much more likely to say they’re at least OK financially, compared to retirees who have no private income, according to a Board of Governors of the Federal Reserve System report.

Gold may have a reputation as a steady, even-keeled asset, based on its past performance, but that doesn’t mean it isn’t capable of producing noteworthy returns.

Investors who owned gold this year, for instance, may have been able to reap the benefits of the recent new record price levels it reached — most recently, topping more than $2,685 on September 26, according to Investing News Network. Since the start of 2024, gold had risen more than 18% as of August. 7.

Some industry members are predicting the interest in gold could rise even higher.

Total year-to-year global gold demand increased 4% in the second quarter of 2024, with strong central bank and over-the-counter buying, which takes place directly between two parties, contributing to the rise, according to the World Gold Council.

“The OTC market has seen continued appetite for gold from institutional and high-net-worth investors, as well as family offices, as they turn to gold for portfolio diversification,” Louise Street, World Gold Council’s senior markets analyst, said in a statement. “While there are potential headwinds for gold ahead, there are also changes taking place in the global market that should support and elevate gold demand.”

With the continued uncertainty surrounding interest rates, inflation, and both domestic and global political events, investors may, in the coming months, be seeking safe harbor assets.

When people are worried about the economy or global conditions, according to Kevin DeMeritt, we tend to see more turn toward gold.

“No one [can] tell you when the stock market or home values are going to fall,” DeMeritt says. “It can have a devastating effect, especially if you’re retired. You need something that has an inverse relationship to those kinds of things. Diversification usually works out much, much better for people over the long term.

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