Gold and silver have generally retained value, even when the economy has faltered — and, as a result, a number of investors have chosen to incorporate physical precious metal assets into their portfolios, according to Lear Capital chairman and founder Kevin DeMeritt.
“Gold has an inverse relationship to stocks and other types of assets,” DeMeritt says. “The volatility of gold is not going to be the same as other investments. It typically is going to give your portfolio stability as other assets become more volatile.”
For more than 25 years, Los Angeles-based Lear Capital has helped investors diversify their portfolios through the purchase of physical precious metal assets.
In Lear Capital reviews shared on various online platforms, some of the more than 90,000 customers the company has worked with have said they opted to buy precious metals for a variety of reasons — including the following factors.
Proactively Preparing for Future Dollar Activity
In the past, gold has often moved in the opposite direction of dollar strength; generally, the weaker the U.S. dollar, the higher gold’s price has been, according to Lear Capital.
However, precious metals have also been known to rise in value at times even when the dollar is robust. Although the U.S. dollar was comparatively strong in 2022, for instance — ultimately appreciating more than 12%, according to a report from J.P. Morgan Research — the annual global investment in precious metal coins and bars increased 10% last year, according to the World Gold Council.
In one of the Lear Capital reviews customers have posted on the Trustpilot website, Frank B., a U.S.-based investor, said his precious metal purchases have helped offer a sense of tranquility.
“After watching my funds disappear from my other investments, I decided that I would be better off with precious metals than having a portfolio that has had a track record of losses,” he said in his review. “Now I have peace of mind that regardless of what happens, I have what I have. If the dollar value drops, I win with precious metals.”
Combating Rising Prices
Investors sometimes include precious metals in their portfolio to try and safeguard against inflation, Kevin DeMeritt says.
“Each year that goes by, if I’m losing [a percentage] of the value of my paper money’s purchasing power, I need something to offset that,” he says. “Gold is going to be a great alternative because it happened, in the past, to be one of the better opportunities that can offset that inflation rate.”
The level of inflation in the U.S. has receded from the 9.1% high it ascended to in June 2022 — the most elevated point it had hit since 1981. However, the Federal Reserve’s latest projections suggest inflation, which currently stands at 3.2%, won’t reach the Fed’s 2% desired goal until 2026.
Gold has historically shown resilience during high inflationary periods. In the 1970s, according to Kevin DeMeritt, when inflation was high and interest rates rose, the price of gold was up more than 500%.
“Gold is often seen as a pretty good hedge against inflation,” Kevin DeMeritt says. “As people look to hedge against higher and higher interest rates, precious metals [interest] will pick up.”
Silver, too, is sometimes viewed as a buffer against inflation. U.S.-based investor Catherine S. said she had been concerned about the effect it could have on her savings efforts prior to purchasing silver coins from Lear Capital.
“With the world in turmoil — and everything seems upside-down — I was growing more and more concerned about my finances, my savings account in particular,” Catherine said in one of the Lear Capital reviews published on Trustpilot. “I worried that everything I’d worked for and saved would become worthless. I decided to start with a purchase of silver. When I received my coins, I couldn’t have been happier. They were exactly as promised.”
Counteracting Other Losses
To a number of investors, gold represents a type of safe harbor asset in what can feel sometimes like a very rocky investment landscape. While the stock market can be considerably sensitive to factors such as economic policy changes and political unrest, metals such as gold and silver have tended to be less reactive.
Despite downturns such as the prolonged Great Recession, for example, gold’s price has generally increased over the past two decades. During six of the past eight recessions, actually, a CME Group analysis found gold performed 37% better than the S&P 500 index, on average.
Some Lear Capital reviews have touched on market volatility — which was a concern for Dianne B., who has purchased precious metals through Lear Capital since 2020.
“After much anxiety with my investments in the stock market, I decided to contact and explore precious metals at Lear Capital,” she said. “Throughout my association with Lear Capital, I have been very pleased with the efficiency of the purchasing process. I trust Lear Capital and [am] so grateful for their commitment to my successful financial future!”
A number of investors may not be aware gold has an inverse relationship to stocks, Kevin DeMeritt says — the ones who do, though, can potentially benefit if the market dips downward.
“Gold has dramatically outproduced the stock market,” the Lear Capital founder says. “If you invested $100,000 in stocks in the year 2000, it would be worth around $320,000 today; if you invested $80,000 in stock and $20,000 in gold, it would be worth $385,000. In times of war or terrorism, usually you’re going to find the markets become extremely volatile — nobody knows what’s going on from day to day. The asset that gives you some stability while all those things are happening typically is gold. It’s a great diversification tool.”
