Greetings! 
 

The appeal for gold as an investment or "safe haven" is because of its historic role as a form of currency and backing of the monetary system. Historically, a surge in gold demand (and therefore the prices) is often in times of fear related to potential inflation and increasing global debt.

Some are concerned that the US economy will collapse and the US dollar will be worthless, leaving only gold to buy goods and services. But gold, or any precious metal, is only worth what someone is willing to pay or barter for it. In the unlikely event we do experience an economic collapse, staples such as food, water, and clothing may become more valuable because people would need those things to survive.

Others speculate that the United States or other nations will revert back to a gold standard. This is unlikely because governments would be giving up a great deal of flexibility in their monetary and fiscal policies. Their ability to spend money would be constrained and they would have far less leeway to take measures to stabilize their economy.

According to the World Gold Council gold is unique in that it doesn't have credit risk; it's no one's liability. However, like any sector of investing, the flight into gold carries its own dangers and tends to be volatile. 

To own gold, you have to buy bullion or coins. Buying gold mutual funds or stocks is not necessarily buying the actual metal. You may be purchasing stock in a company or a group of companies (mutual funds) that are involved in the gold business such as mining where you participate in the profits and losses of that business. Be aware of the potential for fraud and deal only with reputable companies when buying gold bullion or coins. Understand the differences between how various forms of gold ownership are priced and valued and expect to pay a premium or commission.

Diversification of your assets is important to weather the cycles of the economy and the financial markets. Gold, like other assets, should be weighted appropriately within the portfolio - and you might be surprised to find you already have exposure to the sector within one or more of your mutual funds. If you have any questions or would like to discuss in more detail, do not hesitate to talk with one of our planners.