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Should I invest in gold?

Should I invest in gold?

Gold can provide diversification in a simple way, since it has a history of being generally non-correlated with most other asset classes.

It is not necessarily a hedge against anything specific, as some claim, since its price movement is too random. Conventional wisdom says that investing in gold might be a good hedge against inflation or market cataclysms. Some of these beliefs are unfounded.

The price of gold appears to go up only when it is in high demand (such as when the price has gone up some already), rather than in tandem to any specific market force such as inflation or interest rates. If investors have some idea of when other investors are going to pile in, such as during times of uncertainty, they will likely be able to ride an uptrend in gold prices for a while.

People view it as a safe haven for their money, or even as a universal currency. These notions are mostly romanticized, but investor sentiment can do a lot of things to the price of assets, and especially gold.

There are several ways you can invest in gold. Physical gold bullion, which is usually produced in standardized increments of 1 oz., 10 oz., 100 oz., or 400 troy oz. can be acquired from gold dealers at a relatively low premium.

You can also buy shares of gold ETFs. The first gold ETF was launched in March of 2003 on the Australian Stock Exchange with the symbol “GOLD,” and since then, other ETFs investing in gold have appeared on the market.

Keywords: investments, gold, portfolio management, asset allocation, diversification, investor sentiment, correlation,
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