Gold investing has been a great investment for about the past decade after what was easily the most miserable 2 decades (1980-2000) in the history of precious metals investing. A decade ago tech stocks were coming off a super-bubble and there was absolutely no interest in gold or silver and those who owned mining stocks were wondering if they would ever be worth anything. I vividly remember debating on buying Comex gold futures when they were hovering just over $270 per ounce. I wasn’t sure how much potential the trade would have, but I was fairly confident that we were heading into a bullish 18-20 year cycle for gold and silver. Looking back it’s hard to believe that I didn’t buy several gold contracts considering there was so little downside risk, but commodity bottoms are notorious for wearing down investors and gold was no different.
Since QE2 began in September 2010 the interest in and chatter surrounding precious metals has grown exponentially. First it was silver that went on a parabolic run reaching it’s nominal high from 1980 just under $50 per ounce. This summer it’s been gold that has been the metal of choice as European and U.S. debt worries have sent investors looking for hard assets. When we made a double top in gold around the $1920 level I mentioned that I thought it was a good time to take some profits. Immediately other investors were blasting me for even thinking of selling any gold. The same thing occurred when I sold my silver at $48 and change back in April. It’s funny how investors who come late to the party tend to be very emotional about their market positions. I use it as an indicator of where we are in the cycle.
Should people be investing in gold at this time? The question really depends upon why you are investing. If you believe that our fiat monetary systems are doomed to fail and you don’t have any hard assets that perform well in times of inflation, then gold could be a good diversification tool. Personally I would rather own other types of hard assets such as real estate or even oil producers because these assets can be purchased at a discount to gold right now. This was the opposite in 2008 when the oil market had gotten way out of line and was trading at a large premium to gold and silver. The unique aspect of gold is that people cling to is the idea that gold can be used as money if the monetary system collapses. This may be true but it’s similar to the mentality of storing dehydrated food in a bomb shelter. If this is your intent then the price of gold in the current marketplace is irrelevant so you should simply convert your cash to gold on a regular basis. If you are looking at it as a profitable investment you may want to balance your portfolio with other asset classes such as oil and real estate.
Source by Michael R Peterson
Should You Be Investing In Gold In Case Inflation Rises?
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