Question: Why Invest in Gold?
Answer: Investors should have some gold in their portfolio, for three reasons:
- gold prices often increase after a stock market crash. That's because investors will flee to safety, and gold has often been seen as a safe investment.
- For similar reasons, gold also tends to gain in value as the value of the dollar declines.
- Finally, many investors will buy gold as a hedge against inflation.
Gold should not be bought alone as an investment. Gold itself is speculative, and can have high peaks and low valleys. That makes it too risky for the average individual investor. Furthermore, despite the peaks and valleys, over the long run the value of gold doesn't beat inflation. Instead, gold should only be part of a diversified portfolio which includes other commodities such as oil, mining and investments in other hard assets.
Commodities FAQ
- What Are Commodities?
- What Are Commodities Futures?
- How Does Commodities Trading Affect the Economy?
- How Are Oil Prices Determined?
- Is Gold a Good Hedge Against a Stock Market Decline? More US Economy Q&A
