Is Investing in Gold a Good Idea?

In times of economic crisis, some investors turn to gold as an investment hedge (a sort of financial insurance) to protect their investment portfolios. That makes a lot of sense today, given the current value of gold. While this value fluctuates (as with any investment), one thing is certain – as the oldest valuable commodity, the chances of gold ever being worthless are next to none. That is why investors have traditionally turned to precious metals in times of widespread financial woe. It still shines, and it will keep on shining.

Considering the current financial climate, one might consider if it is a good time to invest in gold. Even people who have very small or nonexistent investment portfolios are considering purchasing some gold. With the price of gold high and getting higher, wouldn’t someone be crazy not to invest? Unfortunately, there is no straight answer to that question. For some people, now is absolutely the time to buy gold. For others, it is not a good time. So how do you know if it is a good time for you to buy gold?

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Do you have a lot of consumer debt (credit card balances, car loans, or similar debt)? If so, you would be better off applying any extra money you have to your debt. Are you overly concerned with the short-term performance of your investment portfolio? If so, gold might not be the commodity for you. This is because gold does not generally have a good return.

How can that be? The gold prices are so high! If I had bought gold years ago, I could sell it for so much more now!

True, but all those years you would have kept gold in your portfolio, you would have been paying to keep it there. No matter how you hold your gold investment, it does cost something to keep it. If you keep your gold in exchange-traded funds (ticker symbol GLD), you pay a small fee to handle the price of storing the gold, and you pay your broker a fee on whatever you make on your gold. If you keep your gold in a safe-deposit box, you pay for the safe-deposit box and for the insurance you would need to protect your investment. The same goes for storing the gold in your home. The very thing that makes gold so attractive (the fact that it is tangible) is the thing that makes it so risky. If someone steals it, it is gone.

As a side note, the investment options mentioned above are the best way to own gold. It is not wise to invest in gold stocks – you are really investing in the company that mines the gold, so while you get partial ownership of that company’s gold, you are still vulnerable to that company’s business practices and financial pitfalls; Even buying gold coins, bullion, or bars is potentially risky. If you buy gold you want to make sure it is pure. Paying full price for a precious metal with fillers is a real possibility in a market that is flooded with questionable merchants pushing gold at every opportunity.

With so much to consider, one might be inclined to skip the current and gold rush. Not so fast. For some investors, now is a great time to buy gold. If you have some extra money for investing and know how gold will affect your portfolio, gold is a great addition that will round out your portfolio and reduce fluctuations. If you are comfortable enough to put some money away for the long term, gold might be the way to go. Additionally, if you have a reputable dealer and some place safe to store it, you could buy gold to store yourself. There is something to be said for having assets you can touch.