GOLD AS AN INTERNATIONAL CURRENCY:
Today, the almighty US dollar is the world's most accepted currency, but as most of us know quite well that it may not be true after 10 years or so. US dollar is also the world's most inflated currency. Countries like China, Russia, Japan, India, Venezuela, N. Korea and many others have been demanding an alternate world currency for many years now, and their calls have just gotten stronger.
COMMON QUESTION: Many individuals ask me "How can Gold become a world currency when most of the gold mines in the world are limited only to a few countries?".
My explanation is quite simple, when US dollar can be printed only by one country (United States) and still become a global currency then why not Gold. Atleast Gold is produced my many more countries worldwide. There is only a limited supply of gold in this world and each country already maintains significant Gold reserves. For ages, gold has maintained it's value, even before US Dollar came into existence. No one can print or create fake gold. Jewelers in any country will give you their local currency in exchange for gold coins. Most analysts believe that the true value of gold when adjusted to inflation should be around $2200 dollars. Therefore buying gold under $1000 cannot be too bad. Recently Crammer suggested that people should have 20% portfolio of gold based ETF/Stocks.
US DOLLAR IS DESTINED TO LOSE ITS VALUE:
Other big factors that will play against USD are astronomical US budget deficits and massive government's borrowing. The demand of US treasury bonds has been falling as countries like China, Russia and Japan show less interest in buying them. Most of the treasury bonds are held by US financial institutions and individual US investors. Bonds are like credit cards and they use to be one of the safest investments. But today they are quite risky in my opinion. Not to mention issues like the retiring Baby Boomer generation, Medicare and Social security costs will likely result in printing of more US dollars and increased taxes.
WHY I THINK IMF-SDR's WILL NOT FLY:
Because there is too much international politics involved.
Preferably IMF currency ( SDRs or Special Drawing Rights).
Recently in the G-20 submit, there was an agreement to create a new international money worth $250 billion. SDRs will are issued to countries in proportion to their IMF quotas. IMF has issued about 21 billion SDR's since 1970. Problem with SDR's is that they require a lot of regulation and thats why SDR's cannot be printed in large quantities.
HOW TO OWN GOLD:
The best way to own GOLD is to buy physical coins/bars, but people who do not want to get into the hassle of storing and securing coins can buy gold ETF (NYSEARCA:GLD). Gold also has several industrial and ornamental uses. Also there is also a limited supply of gold in the world. Silver ETF (NYSEARCA:SLV) is another alternate to gold, in fact lately it has performed much better than gold itself.
Many analysts predict that prices of gold will possibly dip before rising again. I am not a gold trading expert but at least someone who strongly believes that Gold is likely the best investment in the next 10 years.
My portfolio: I personally like my portfolio to be 25% stocks in BRIC countries, 25% in Gold, 25% in SDY, 10% in I-bonds and rest as cash. These are my personal opinions, not an investment advice. Please do your own research before investing in gold.