Insurance or Investment

Insurance or Investment?

Reevaluating gold presence in a portfolio

Gold is quite a controversial investment because there are investors who are either for or against it. Nevertheless, there are also those who wait on the sidelines before deciding on including the precious commodity in their portfolio—some stay on the safe side and add about 5% gold presence as an investment, just for diversification. Despite its fluctuating prices, which makes investors skeptic about the metal, it still has many advocates. According to The Wall Street Journal, financial advisers are of the opinion that the benefits of owning gold will overshadow the market’s “occasional skittishness”, so investors should think long term where gold is concerned.

Even with the unpredictability of gold prices, can it still be considered as a wise option? The Market Oracle seems to think so—in an article, it was claimed that gold stocks are the “greatest investment opportunity in thirty years”. In making a case for the metal, it was stated that gold stocks are at an extreme low which hasn’t been seen in three decades. One effective way to measure the value of gold stocks is to compare these with current gold prices explained by Bullionvault . The stock will be more valuable if the product price is higher.

This brings us to the question: is gold an investment or an insurance? Coin Week answered this question by saying it’s both. The commodity can act as an insurance policy against monetary crisis and economic problems, while at the same time it’s also an investment with the purpose of realizing profits and returns beyond inflation. Gold has performed fairly well in different situations; when currency depreciated during inflation of the US Federal Reserves (thus driving down the dollar), gold prices were up. Should an economic collapse surface, rendering legal tender quite useless, gold may be used as bartering tool should there be a lack of acceptable currency. Also, when assets such as bonds and equity markets are in a downtrend, gold maintains its value.

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