Is Gold A Good Investment?

It's current price in dollars is about $1,370 per ounce. At that price, if you have some extra money, would you be wise to invest it in gold? If you have gold jewelry, should you keep it or sell it?

Measured in dollars, unadjusted for inflation, gold hit an all-time high of $1,409.80 an ounce on November 9th and while its price fluctuates, it has tripled in the last six years. Why? From fear. There is tremendous anxiety about the U.S. and European economies and the dollar and euro so nervous investors have bid the price up.

But while gold coins and jewelry are pretty to look at they have little practical value and can be a lousy investment. You can't eat or drink them, gas your car with them nor easily spend them. They make no interest income and they can lose value.

If you need cash to pay your bills, seriously consider selling the gold jewelry that has no sentimental value to you. Making a mortgage or car payment or paying for your health insurance is far more important than a largely forgotten piece of jewelry.

If you are an experienced commodities investor and you are knowledgeable in gold, then you may want to speculate in its value and even do so in multiple currencies. But if you are like most of us and simply want a hedge against the declining dollar or euro, then it may be worth a small investment of your savings.

One of the most common ways to invest in gold is to buy shares in a gold fund. The biggest fund is SPDR Gold Shares, which trades under ticker symbol GLD on the New York Stock Exchange,* as well as in Hong Kong, Mexico City, Singapore and Tokyo. Funds are relatively inexpensive and let investors get easily in and out of gold.

If you would like to own coins, you can buy one ounce or even 1/10 ounce gold coins and put them away. If the U.S. and/or European economies bounce back and the dollar and euro become strong, you likely will have lost some value but you had the comfort of feeling safer about your savings.

But if the U.S. and/or European economies collapse and take their currencies with it, or they inflate their currencies to try to avoid a collapse, you will be pleased you have this sanctuary of value and what could become valuable and usable currency.

Dick
*For more information about GLD and using this approach to invest, please see Wall Street Journal, "Behind Gold's New Glister:  Miners' Big Bet on a Fund," 11/26/10 http://online.wsj.com/article/SB10001424052748703628204575618602535514506.html