Why Invest in Gold?
Gold is one of mans oldest investments, it has been prized since the beginning of humanity. Unlike other investments whose value is fleeting gold has retained its value for centuries. Even today gold is one of the most sought after commodities known to man, and that is what makes gold the perfect investment. There are advantages to investing in gold that go far beyond it's beauty or usefulness as a metal. Gold is the ideal way to protect yourself from the risks that come with other types of investments like stocks.
The best reason to invest in gold is that it offers a way to protect your portfolio during times when the stock market is weak. Most investments are subject to swings in their value, in some cases like stocks and futures these swings can happen very quickly. Gold on the other hand moves much more slowly, it won't rise in value as fast as stocks but it also won't decrease in value as quickly either. Gold also has the significant advantage of usually doing better during bear markets. Because gold is viewed as a safe investment people tend to invest more in gold when the stock market is weak.
Anybody who has investments that are denominated in US dollars is well aware of the risk of currency fluctuations on their investments. Not only do you lose money do the decreasing value of your investment you also lose money because of the decreasing value of the US dollar. Gold offers protection against this. Since gold is traded in many markets using different currencies there is no currency risk to investing in gold.
Although it generally doesn't behave like one it is important to remember that gold is in fact a commodity. That means that it is subject to the same laws of supply and demand that affect any other currency. The good news for gold investors is that current gold production doesn't match demand. In the future gold will be in ever shorter supply, causing an increase in value. Investors in gold will get the double benefit of increased demand from investors looking for a safe haven and a reduction in supply. This should send the value of gold to all time highs.
A balanced portfolio is a critical part of successful investing and your portfolios should include gold. It would probably not be a wise move to put all of your money into gold but it should certainly be a major part of your investment. Ideally you would like to have high growth potential investments like stocks combined with a more stable investment like gold. This will give you the best of both worlds and allow you to profit in a strong bull market while at the same time offering you protection when the market takes a downward turn.