Three “Golden Rules” For Investing in Gold

 

Everybody’s buying gold. You can’t turn on the TV without seeing some old guy telling you how great an investment it is or have someone offer you the ever popular “cash for your gold!”.  And you’re probably sick of hearing how much money your uncle has made from gold at family get-togethers. Don’t be confused by the commotion. Here’s what you need to know:

1. It’s Real: Unlike stocks and bonds, gold is a real asset that has a physical characteristic, similar to real estate and oil. You can pick it up, touch it, and feel it.  Unlike real estate and oil, however, gold has no “value” – it’s not like stock of a company that makes money and pays a dividend or a bond that pays a coupon (ask Warren Buffet). Those have a value that can be reasonably determined. Gold doesn’t earn interest, doesn’t make money selling anything, it can’t be used to generate energy, or to live in and you can’t eat it. It’s only worth what someone is willing to pay you for it.

2. Demand is High: Over the last few years, people have been willing to pay a whole hell of a lot for it. Gold has gone from less than $300/ounce in 2002 to over $1,700/ounce today. The question is, will people continue to pay a lot?

 3. Its for the Rocky Times: History shows that in bad times gold does great (explains why its done so well recently), and in good times it does not do as well as stocks or bonds. As the global economy continues to improve slowly, owning a small amount of gold through the SPDR Gold ETF (GLD)* makes sense to us to protect against bad times, but don’t bet the farm.

*This ETF or Exchange Traded Fund allows you to purchase gold just like you would a stock and is the most common way investors get exposure to gold

Disclosure: The Grappler Media is not a Registered Investment Advisor and we do not provide investment advice. Please consult with your investment advisor prior to making any investment decisions.

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