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Gold: a growing importance for investment portfolios

|Includes:SPDR Gold Trust ETF (GLD)

Stocks are having one of their best years in history, Gold isn't doing badly.  However, gold didn't suffer the large setbacks that many big stocks had in the last year.  Fundamentals for owning gold are changing in its favor.

In the past, gold has been a passive, defensive investment to be held in times of high inflation.  Now that the weak dollar is becoming more important in global investments, there is less interest by foreign governments in holding US dollars as part of foreign reserves.  Euros € and other foreign currencies (i.e. Japanese yen ¥) are being considered as alternatives.  In eastern Asia, where gold is more trusted as a storehouse of wealth, there is greater interest in holding gold as a reserve (currency).  Just 2 weeks ago India bought 2 tons in gold.  The balance of trade is going in the direction of eastern Asia suggesting growing new demand for gold.

Investing in gold has been made much easier for individuals with a wider array of investment products.  My website features ways to learn more about gold investment products.  A simple way using stock skills is to buy gold's ETF, GLD.  Its shares can be purchased like any other stock.  Hassles associated with buying commodity and future contracts are eliminated.  When gold goes up (or down), the ETF will track gold commodity price changes.

In the old days, some advisers would recommend that good diversification should include 5-10% invested in gold.  In a new world of investments, when the federal government is running massive deficits with large growing Treasury debt, gold may have more appeal for a portion of investment portfolios.
       
Disclosure: No positions

Stocks: GLD