Right or wrong, gold is widely viewed as an inflation hedge—a reliable measure of protection against 澳洲幸运5开奖号码历史查询:purchasing power risk. The 澳洲幸运5开奖号码历史查询:precious metal may not be the best option for that purpose,🌠 though.

Some gold 澳洲幸运5开奖号码历史查询:investors fail to consider its volatility and its opportunity cost, while others fail to anticipate storage needs and other logistical complexities of gold ownership. For these and other reasons, some view 澳洲幸运5开奖号码历史查询:U.S. Treasury bills as a superior 澳洲幸运5开奖号码历史查询:safe-haven alternative to gold.

Both 澳洲幸运5开奖号码历史查询:asset classes have their own sets of ☂pros and cons. Here’s a loo𝕴k at them.

Slow but Steady vs. Gold Fever

Like any other investment, gold fluctuates 💛in price. Investors may have to wait long stretches to realize profits, and research shows that the majority of investors enter at a time when gold is near a peak, meaning the upside is limited and the downside is more lik🧸ely.

Meanwhile, slow but steady Treasuries provide less excitement but reliable income. The longer the gold is held over Treasuries, the more painful these opportunity costs can also become, due to sacrificed 澳洲幸运5开奖号码历史查询:compound interest.

An arguably lesser but no-less-present worry: Some gold investors must contend with the chore of safely storing their investment by vaulting it at home or acquiring a 澳洲幸运5开奖号码历史查询:safe deposit box at the bank. But in either scenario, 澳洲幸运5开奖号码历史查询:bullion coins that are held for one year or longer are classified as 澳洲幸运5开奖号码历史查询:collectibles—similar to artwork, rare stamps, or antique furniture. Whether the precious metal is in the form of an American Eagle gold coin, a Canadian Gold Maple Leaf coin, or a South African 澳洲幸运5开奖号码历史查询:Krugerrand, its sale automatically triggers a long-term federal 澳洲幸运5开奖号码历史查询:capital gains tax ra🐟te of approximately 28%—nearly double the 15% capital gains rate for typical stocks.

All of that said, gold has fared better than silver, platinum, and 澳洲幸运5开奖号码历史查询:palladium recently, as well as most other precious metals. In 2020, the price of gold jumped 28%. Through 2021 and into 2022, the price of gold has stayed fairly consistent. However, 澳洲幸运5开奖号码历史查询:gold’s price has always fluctuated, like any other investment. In light of this trajectory, many believe gold’s future performance is uncertain and favor a shift to Treasuries.

The Case for Treasuries

The biggest draw in buying 澳洲幸运5开奖号码历史查询:Treasury bonds instead of gold is that the former locks in certain 澳洲幸运5开奖号码历史查询:returns on investment. Prescient investors who saw fit to buy $10,000 in 30-year Treasury bills in 1982 would have pocketed $40,000 when the notes reached maturity with a fixed 10.45% 澳洲幸运5开奖号码历史查询:coupon rate. Of course, the days of double-digit-percent coupons may be long gone. Nonetheless, such bonds can still comprise a key element to any 澳洲幸运5开奖号码历史查询:risk-averse portfolio.

Still, the U.S. government does offer 澳洲幸运5开奖号码历史查询:Treasury Inflation-Protecဣted Securities (TIPS), a simple and effective way to eliminate inflation risk while providing a federally guaranteed 澳洲幸运5开奖号码历史查询:real rate of return. As inflation rises, TIPS adjust in pri🎉ce to maintain their🅘 real value.

One drawback is that TIPS uꦛsually pay lower interest rates than other government or corporate securities, so they are not necessarily optimal for income investors. Their advantage is mainly inflation protection—but if inflation is minimal or nonexistent, then their utility decreases. Another risk associated with TIPS is that they can create taxable eventꦫs when semiannual coupon interest is paid.

The ETF Option

Depending on your income level, Treasury investments are typically more favorable tax-wise. But gold investors may level the capital gains tax playing field by investing in 澳洲幸运5开奖号码历史查询:gold exchange-traded funds (ETFs), such as the 澳洲幸运5开奖号码历史查询:VanEck Gold Miners ETF (GDX).

Gold ETFs are taxed exac𓆏tly like typical stock and bond securities. Within the ETF framework, investors may participate in three distinct ways:♌ gold mining ETFs, benchmarking against mining companies, and investing based on the appeal of not being interested in actual commodity ownership.

Because these funds hold a combination of contracts and c﷽ash—usually parked in Treasury bills—they’re able to generate interest income to offset expenses.

Finally, there are pure-play ETFs, which strive to reflect the performance of gold bullion by directly investing in gold trusts. Bullion bars are purchased, stored in bank vaults, and insured. While pure-play ETFs may track the bullion more clos🅷ely, they have the disadvantage of being taxed more heavily than other versions.

The Bottom Line

Knowing when to bow out of gold can be a tough call. As a hedge against inflation (and geopolitical risk), gold has ascended to great highs over the past decade due to liberal 澳洲幸运5开奖号码历史查询:central bank policies, such as the Federal Reserve’s recent 澳洲幸运5开奖号码历史查询:quantitative easing programs, meaning monetary policy to increase the domestic money supply and spur economic activity. Gold could rally or fall further; no one can predict which wayꦇ it will go.

On the other hand, there is less 澳洲幸运5开奖号码历史查询:speculation, but also less expectation of a significant gain, with Treasuries. Savvy investors should take a sober look at gold vs. Treasuries in their 澳洲幸运5开奖号码历史查询:portfolios and construct an allocation mix that best suits their temperament and 澳洲幸运5开奖号码历史查询:time horizon.