Simple Gold Strategy

Investors who are interested in buying gold usually ask, “when would you consider that I should purchase my gold?” The brief answer is “whenever you need it.” You can by no means approach gold the same way you approach equity investments. The time is not really a dilemma. The actual question should be if you are diversified and protected against potential uncertainties ahead, such as inflation, deflation, hyperinflation, depression, stock market panic, currency collapse, or bank closures, or not. If you do not have gold and you feel you need to, now is the best time to start. It is better to be a day early than an hour late.

This, however, infers another question: “do you believe the price will rise soon? Until recently, the fundamental philosophy outlined in the first part of this writing has been held: for most investors, gold is essentially an insurance and portfolio hedge. However, it is now believed that we have entered a new era for gold – one separate from anything we’ve seen in the past twenty years and more reminiscent of the 1970s, when immense price pikes in relatively short periods of time produced extraordinary profits.

Due to this, it is now believed that gold should just be seen as a portfolio hedge any longer – even though it hasn’t lost any of the qualities that make it such -  but also as a vehicle for gains in portfolio. This amounts to the best of all possible worlds for the owner of gold. There is barely any question that every portfolio needs hedging, safe-haven characteristics of gold as long-term portfolio insurance. It is now believed that insurance offers impressive investment potential based on the probable quick depreciation of the dollar and its loss of status as the world’s only and primary reserve unit.

Prognosticating the price could be a risky and complicated undertaking. Price swings up and down can be, and probably will be, violent. We already hear hear complaints of gold’s volatility regularly. The questions become, “with these circumstances in mind how should I approach gold? What strategy would be the most advantageous?