Gold at $1,800 an ounce: What you need to know

Since 2002, the price of gold has risen from under $300 an ounce to about $1,800 an ounce. That’s an increase of 538%. Gold prices are now the highest they have been in over 30 years.

When the market is down and uncertainty is high, people tend to look for a place to stash their cash outside of the stock market. Investment in gold and other precious metals tends to increase significantly during tough times. But I have a warning for anyone considering putting some or all of their money in gold.

Gold and other precious metals are speculative investments. The price increases as a response to higher demand during uncertain times. Those who buy gold are essentially betting (speculating) that the market won’t improve anytime soon.

If you insist on buying gold, avoid buying physical bars or coins. Aside from the storage issue, there are high costs associated with acquiring physical gold. I recommend instead investing in gold Exchange Traded Funds (ETFs.)  To maintain a balanced portfolio, don’t invest more than 5-10% of your assets in gold and other precious metals.

Gold prices are approaching all-time highs. Who knows how much higher they will go. Do you want to get caught in the next bubble?

What do you think?

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s