THE CASE FOR AND AGAINST GOLD
March 14, 2011
The Case for and Against Gold
By Janet Briaud
The Wall Street Journal
March 14, 2011
Should gold be represented in an investment portfolio? I believe it should, for a number of reasons.
In the short run, gold can be a safe haven in a time of crisis. We don't know what the next crisis will be, but we have seen plenty of "black swan" events over the past two years alone; our markets and our world seem increasingly hard-wired to experience periods of crisis and calm. In this sense, gold can be seen as a short-term hedge, or a short-term speculative play on volatility….
In the longer term, gold is a good way to invest in expectation of higher inflation—a growing possibility. As governments battle debt problems and central banks intervene on their behalf, we could very well see deliberate weakening of currencies in many developed countries. Why use gold, rather than some other inflation hedge? Simplicity….
Another consideration for the long term is that gold may partially regain its status as a reserve currency. Individual investors hedging against inflation with gold is one thing, but central banks doing the same is another matter entirely.
If central banks start buying gold in earnest, it will create extra demand. Even if central banks simply hold onto their stockpiles of the metal, they will limit supply. Either scenario gives some support to the gold price….
To be sure, gold comes with caveats, and investors should incorporate it into their portfolios only with an understanding of the risks. It can be volatile, for one thing, and prices certainly look more frothy than they did a decade ago….
But they're far from bubble territory. Gold, which is currently above $1,400 an ounce, would need to top $2,000 to match its all-time high, adjusted for inflation. Indeed, gold is still something of a contrarian investment. Ten years ago, gold was almost universally hated as an investment. I know firsthand because people thought I was crazy for buying it. Today, gold is still eyed with suspicion by most.
I do not advocate an enormous percentage allocation to gold, but I do think a responsible investor should allocate at least a portion of the portfolio (5% to 10%) to the metal…
Read full article here.
†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.
You should review Goldine's Account Agreement along with our risk disclosure booklet, Coin Facts for Investors and Collectors to Consider ®, prior to making your purchase. Goldline has a spread or price difference between our selling price, called the "ask", and our buy-back price, called the "bid". That spread varies depending on coin or bar you acquire. Spreads on 1 oz bullion coins, 90% silver dimes and quarters, and one ounce and larger bullion bars are 13%. All other coins have a spread of 28%. There is also a 1% liquidation fee when you sell your coins back to Goldline. The market must go up enough to overcome this spread before an actual profit is achieved. Precious metals and rare coins can increase or decrease in value. Past performance does not guarantee future results. Coins are a long-term, three- to five-year, preferably five- to ten-year investment. We believe precious metals are suitable for 5% to 20% of the average investment portfolio though others may recommend a different percentage.
To receive free information package on gold and precious metals investing, call Goldline at 1-877-376-2643.
