Early Retirement Blog

In times of economic turmoil money flows into the lowest risk investments. That used to be the U.S. Dollar and U.S. Government Bonds, but with a massive economic crisis in the United States, where does money find safety?

Is gold in your retirement portfolio?

Many investors buy gold believing that it will provide a hedge against inflation.  An excellent article by inflationdata.com, debates this common wisdom, and points out that the correlation between gold and inflation is not as strong as most investors believe.

However, the same article points out, that “In times of uncertainty investors turn to Gold as a hedge against unforeseen disasters since gold is one of the few investments that is not simultaneously an asset and someone else’s liability.”

Gold tends to perform well, when there are global political and financial crises, and retirement investors should consider including gold as part of their retirement portfolio.  Most investment professionals, recommend an asset allocation of no more than 5-15%, of your overall retirement portfolio be invested in gold or other precious metals.

The two most cost effective means of including gold in your retirement portfolio, is to purchase gold directly, in the form of bullion, coins, and jewelery, or to purchase gold ETF shares through a discount brokerage.  Gold ETF’s, such as stock ticker symbol GLD, have low expense fees and can be easily traded on the open market.  Obviously, purchasing gold bullion, coins, and jewelery, pose security and disposition problems.

With all the uncertainty in the global financial markets, investing in gold may provide increased returns and lower portfolio risk, talk to your investment adviser or financial planner to see if investing in gold is the right decision for you.

Update: September 27, 2008
So much for investing in gold coins.  The U.S. Mint has suspended sales of it’s 24 Karat Gold Buffalo coins as demand has outstripped supplies.  Sales of it’s 1 ounce American Eagle Gold Coins were suspended on August 15th, after 164,000 coins have been sold so far this year, an increase of 54% over last year.  Minting of gold coins will resume under a new allocation program for dealers.  I do not own any Gold coins, and have never invested in gold coins or bullion, please visit the U.S. Mint for more information.

Important Update: September 2010
Since this article was written, gold has increased in value by 50%, but will gold continue to increase in value? There is literally tons of gold advertising on right wing t.v. and radio, rip-off firms taking advantage of people’s fears, selling people discounted and sometimes bogus gold coins at a large discount.

In a more recent article, I ask the question, “Is Gold In A Bubble?“  Their is now 80 times more paper gold, held by hedge funds and speculators, than their is actual physical gold.  This is a clear indication of a bubble.  If the economy turns around, these speculators will have to get rid of their paper gold positions, and gold prices will collapse.

On the other hand, these same hedge funds and speculators, have a knack for creating economic crises.  It could be that they have positioned themselves for an attack on the U.S. economy and dollar, which would cause the price of gold to soar, enabling them to sell their paper gold at a huge premium.

Similar to what was done with housing and oil.  Pump and dump.  Profit by creating the bubble and profit by collapsing the bubble.  I’ll be watching.  I suggest you subscribe to the Early Retirement Blog to get a heads-up on what the Wall Street thieves are up to.

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