Given the recent run up in gold and other commodiites, many investors are asking themselves \’should I buy gold\’? Investors often hear that they should diversify their assets into multiple classes of investments. These include stocks, bonds, and commodities. Gold is one such commodity. But here are a few things you should consider before you invest in gold.

What Type Of Investment Vehicle Makes Sense For Me?

Not that long ago, you only had a few options when you wanted to invest in gold. On the more conservative side, you could buy physical gold and store it in your house or in a bank\’s safe deposit box. The riskier option was to invest in gold futures on the Chicago Mercantiles commodities exchange. Both had their inherint disadvantages. Storing physical gold wasn\’t always convenient. And the process for acquiring it is tedious, requiring lots of paperwork. Gold futures trading was just plain risky, and best left to the professionals.

Over the last few years investing in gold has become much easier. The simple reason is demand. From the late 1990\’s to now, the price of gold has more than quadrupled. This has caused firms such as State Street Global Advisors to invent methods of making gold investment much easier for retail investors.

Exchange Traded Funds (ETFs) were invented to open up the gold market. GLD is an ETF that allows investors to buy shares in a gold trust. For each share they purchase, they are essentially buying 1/10 ounce of gold. This allows investors to quickly move in and out of gold with very low commisions. It operates like a mutual fund, but can be traded throughout the day on the NYSE, just like a stock. There are many such gold ETF\’s on the market from which to choose.

Gold mining stocks are another method to invest in gold. The share price of gold miners is tied largely to the spot price of gold. As the price goes up, their stock prices tend to go up. The caveat with gold mining stocks is that they\’re stock price is subject to other variables as well. Their gold production, reserves, exploration, and management decisions can affect the price as much as the underlying price of gold. So if a company is poorly run, it\’s share price can easily go down even while the price of gold is going up. One way to spread this risk is to invest in gold minining stock ETFs. In this way you\’re not tied to any one particular companies fate.

Gold bullion is the oldest method of investing in gold. Bullion can be gold bars, gold coins, and even gold jewelry. You\’ll want to purchase from reputable sources. Gold sellers can easily be found by doing a quick Google search. Many people are surprised to learn that EBAY has a large gold trading market. Just make sure the person you\’re dealing with has a VERY good feedback number. EBAY is a great market because you can pay very close to the actual spot price of gold. Some gold selling firms charge large premiums.

When Should I Buy Gold?

Attempting to time your entry into the gold market will lead to nothing but frustration. If you\’re looking at gold as a long term investment, you should use a dollar cost average approach. This might mean allocating a specific amount of money per month to be invested. If the price drops or increases you keep investing until you\’ve built a position with wich you are comfortable.

Historically speaking, gold doesn\’t offer much of a return in comparison to other investments. The reason for it\’s popularity is as a safe haven during dramatic downswings in the economy. When people lose confidence in the stock market, they jump into gold for the safety. During these times, gold will of course see dramatice increases in price. But it\’s difficult to time these sorts of moves.

Another influence on the price of gold is inflation. As dollars, in the case of the U.S., become worth less, the price of gold and other commodities go up accordingly. In this sense, owning gold is protecting you from the loss you would otherwise incur were you to own dollars. The dramatic events from the 2007 sub prime mortgage debacle to the more recent Eurozone crisis have force the Federal Reserver to print vast sums of money, thus diluting the value of the dollar, and increasing practically every commodity.

What Percentage of My Porfolio Should I Own In Gold And Other Precious Metals?

This is a difficult question to answer. It largely depends on your appetite for risk. Many professionals recommend owning 10% of your assets in gold and other metals. Some recommend even more because of the likliehood of further difficulties with Greece, Spain, Italy, and Portugual causing further monetary strain and inflation. But you have to decide for yourself what your comfort level is.

Diversifying your portfolio can go a long way towards protecting your assets. It may even help you sleep better at night. So if you find yourself asking should I buy gold, weigh the questions above carefully before making your final decision.

Given the recent run up in gold prices, what\’s the best way to capitalize on any further increases? Find out the answer to this and more at http://www.investingingoldfordummies.com.

Given the recent run up in gold prices, what\’s the best way to capitalize on any further increases? Find out the answer to this and more at http://www.investingingoldfordummies.com

Author Bio: Given the recent run up in gold prices, what\’s the best way to capitalize on any further increases? Find out the answer to this and more at http://www.investingingoldfordummies.com.

Category: Finances
Keywords: should I buy gold, investing in gold