Why You Should Still Invest In Gold

 Gold has been a steadily rising asset over the last 10 years. Whether you look at the price of gold per gram or gold per ounce, you see that contrary to popular belief, gold's rise has been slow and steady and not some parabolic move that happened just last year. This isn't to say that the market couldn't correct. Yet, if you're considering buying gold, you need to look at the facts to arrive at your own decision.

Given that, one of the questions many investors are asking at the moment s: Should I buy gold? And with the price of gold at all time highs, it's certainly a fair question to ponder. Before you start out try not to think of gold as a means to make a small fortune, I'd suggest considering that the main reason to obtain gold is for insurance from financial calamity.

The main reason to obtain gold is the fact gold maintains its value in times of financial disaster. These crisis' include political crisis, economic turmoil and the tendency of various Central Banks to print money in an attempt to "right the ship" following a credit expansion.

Whenever an economy accumulates excessive debt levels there are always bad investments in the economy. This was the case with the housing bubble that burst in 2007. Central banks typically get out there and help their member banks by way of a process called monetization, better known as printing money and now referred to as quantitative easing in order to stimulate the economy. Typically this ends up devaluing the currency and hurting consumers purchasing power. The result of this is often inflation and in extreme examples may even cause hyperinflation. .

We have recently experienced what can be referred to as the largest credit/debt boom in modern history. When the financing boom comes to an end as it clearly has, Central Banks have 2 options. They can allow the debt to deflate, or they seek to maintain the boom by lending to member banks at excessively low (near 0%) extremely low rates. Central Banks around the world have opted for the later scenario. However, most consumers are now attempting to repair their individual balance sheets and pay off debt, not acquire more.

In this post bubble environment it's imperative to remember that the central banks mandate is to preserve the livelihood of the banking system. This is why they have kept rates so low. However, this has had a negative impact on the value of the dollar. So, what can you do?

Owning gold helps insure or protect you against these scenarios: inflation (which causes rising food prices) and deflating bond prices. Unlike bonds, gold has no counter party risk to worry about. In other words, if you own a corporate bond, that company can go out of business. However gold is not going to default.

 One of the more common ways to approach gold as an investment is to simply allocate 5-10% of your overall portfolio to gold. Either way, take your time and conduct proper due diligence before investing in any investment, especially gold.