Are You Too Late for the Gold Rush? Plus: A Retirement Rule That Might Be Broken
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What does gold's record high mean for investors?
Gold just hit another record high against the dollar. This episode, what it means for your finances and your portfolio. Welcome to NerdWallet's Smart Money Podcast, where you send us your money questions and we answer them with the help of our genius nerds. I'm Sean Piles.
And I'm Elizabeth Ayala. This episode, we're discussing whether you need 80% of your annual income in retirement. Where did that rule come from anyway? But... First, our weekly money news roundup, where we break down the latest in the world of finance to help you be smarter with your money. Our news colleague, Anahil Hoski, is back to talk about precious metals.
Hey, Elizabeth. Hey, Sean. And yeah, like Sean mentioned, gold has hit a record high. But I'm also thinking about hitting estate sales this weekend and seeing what Grandma Silver's going for, because that's also higher than ever. They've both hit unprecedented levels recently. And it's going to have implications for the economy. So today, our investing colleague, Sam Taub, is here to talk about why investors are flocking to precious metals when uncertainty hits, what drives swings, and how politics and the global economy move prices. And we're also going to talk about when it's worth having some physical metals in your portfolio. Sam, welcome back to Smart Money.
Always great to be here, Ana.
So first off, let's do some level setting. You always hear that gold and silver are safe hands, but what does that actually mean? And why do investors steer toward them during times of uncertainty?
So the fundamental reason why gold and silver appeal to investors is that they're intrinsically valuable, meaning they're rare and they look pretty and they're traditional symbols of wealth in cultures around the world. This is an important distinction. When people say that gold and silver are safe haven investments, they don't mean that their price stays level over time. And as we're going to discuss later on, both can have some pretty dramatic price swings. But precious metals are safe havens because their prices are supposed to move independently of most other things in financial markets and the economy, especially money. When currencies lose their value, precious metals have a very long track record of holding their value by increasing in price in that declining currency.
Over the long term, even if we're talking about thousands of years, gold is remarkably consistent in how much stuff an ounce of it can buy, even though its money price can vary wildly over time.
Yeah, and the prices do seem to change. Gold surged over $5,000 per ounce this week. What's driving this remarkable run over the last six months?
A lot of it is large institutions like central banks and hedge funds and also just really, really wealthy families and individuals buying gold to hedge against geopolitical uncertainty. Things like tariffs and the market volatility that comes with them, as well as hedging against a decline in the value of the dollar.
Why do investors consider gold and silver as safe havens?
As we talked about before, gold tends to hold its value really well against a declining currency.
What about silver? Because its swings have been even more dramatic, even more volatile. What's influencing silver prices?
Silver is a precious metal, so it's subject to the same kinds of precious metal trends we were just talking about. But the thing about silver is that it's also an industrial metal. In fact, most of the global demand for silver actually comes from industrial applications like electronics and photography. rather than things like jewelry and homewares. So another part of the silver story is strong demand from things like computer chips for AI and for electric vehicles.
So we talked about geopolitical uncertainty. Let's talk a little bit more about specifics. We recently saw a clear example of how gold reacted to geopolitical events. Tensions around Greenland and President Trump's tariff threats escalated and then prices fell when he pulled them back. How much do single events like these still move gold prices and why does that happen?
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