How High Will Gold Climb?

Gold hit another all-time record of $1,081.70 an ounce, thanks to India's purchase of 200 metric tons from the IMF (International Monetary Fund).

It is expected other central banks will begin to diversify out of dollars and into gold, thanks to continued fears of dollar depreciation and subsequent inflation. Gold is seen as a safe haven during times of uncertainty. Gold's previous high was $1,072 on October 14, 2009.

Gold prices will continue to rise. Since many investors believe gold is a safe haven, and the global economy is still uncertain, gold's rise has become a self-fulfilling prophecy. Prices may rise to $1,125 by year-end, according to Mario Innecco, an MF Global Ltd. broker in London. Like any other bubble, however, it is nearly impossible to guess how far it will rise, or for how long.

What It Means to You

The best hedge during turbulent times is a well-diversified portfolio. Most financial planners will tell you that you should have no more than 10% of your assets in gold. My personal rule of thumb is to have no more than 30% of your total portfolio in hard assets, including gold and equity in your home. This ratio would have protected you from losing too much during the recent real estate bust. By having your total net worth spread among hard assets, and stocks and bonds in the U.S. and overseas, your investments will perform better over the long haul.

• Should You Buy Gold Now?
• Gold Prices and the Economy
• An Introduction to the U.S. Financial Markets

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