Is Gold a Safe Haven for Investors?


Have you been bitten by the gold bug? With prices soaring to near all time highs, close to $1300.00 per ounce, the precious metal has been attracting the attention of more and more investors. The question arises as to whether or not gold is a safe haven for investors or is it more of a speculation?

Over the course of history, people have flocked to the safety of gold during difficult economic times. There is something about an ounce of gold always having a certain intrinsic value and not being subject to the same devaluation possibilities of paper currency. In inflationary times, gold tends to rise along with everything else and in troubled times it also tends to rise as people believe it is more valuable than paper money which loses purchasing power when inflation occurs.

There are a number of ways to actually invest in gold. You can purchase physical gold and take possession of the commodity. All you have to do is go down to your local coin shop and buy a gold coin or two. Serious investors who want to buy gold can buy at a coin dealer or probably get a better deal through an online company that specializes in selling gold and other precious metals. You can buy in coin form or in gold bar form. Rare gold coins have a value above the spot gold price, while generic gold bars cost a few dollars over spot to buy and sell for spot or a few dollars under spot. Having gold in your possession allows you immediate liquidity and some people just like feeling the gold run through their fingers. On the other hand, holding more than a couple of ounces at home presents the risk of loss from theft or robbery. A solution is to simply open an account with a reputable dealer and have them hold the gold for safe storage. Your gold is available whenever you might want to take physical possession and you enjoy the added convenience of converting it to cash at anytime by simply making a phone call and requesting liquidation. You will receive statements periodically showing the amount of gold you own and its current market value.

Other ways of investing in gold include purchasing an ETF, which is a fund that mirrors the spot price of gold. The advantages of not having to take physical possession of the metal and the ability to buy or sell shares just like a stock, makes this a desirable type of investment for many gold enthusiasts. Purchasing gold stocks is yet another way many investors choose to play the gold angle. In addition to mining gold, these companies enjoy some additional earnings possibilities based on the fundamentals of the company. If they discover a new gold mine, acquire more assets or have great management, chances are good that the price will appreciate at a faster rate than the price of physical gold. On the other hand, bad management and a mine that is not producing as expected, can lead to a greater percentage drop in the stock price than actual gold.

Many so called market experts are predicting gold will rise to $2,000.00 per ounce or more in the next few years. If that comes true, it will represent slightly more than a 50% appreciation in the price from current market levels. That is an excellent return under any definition, but what are the chances of these “experts” being right. Well, with prices close to or at thir historic highs and signs that the economy is slowly recovering, it is more likely than not that gold, at least in in the short term, will stabilize or even drop down a bit.

This does not mean you should not have a portion of gold in your portfolio. It can still be a safe haven against the dollar. Just remember that you should buy gold as a long term investment and not as a speculative investment for short term price appreciation.

This post was written by

jason – who has written posts on Budget Clowns.
Father of three and married to a lovely women. Always looking for ways to save money, and invest it properly for my children's future.

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