I have a lot of money invested in mutual funds and am concerned with the recent drop in the stock market as well as the recent concerns with subprime lenders….do you think that investing in gold is a good hedging strategy? Do you think that the price of gold would rise if some of these lenders tank?
When you say "invest in gold" you have to separate your ideas into "investment" and "Survival"
Gold as a metal is for Survival…If a catastrophic event hits the capital makets, or if WW 3 happens etc, you will need actual gold for some things (like jews fleeing the Nazis in WW 2) .
Gold in the form of ETFs or "GoldMoney" or certificates , or even gold coins or bullion in your safety deposit box, is not a good "Investment". Shares in gold producing companies, or shares in a precious metals mutual fund is a good "Investment" if gold goes up. This is because shares in gold companies have leverage to the price of gold.
If you have an ounce of gold $650US and it goes up $100, you clear $80 after selling commission.
If you had $650 US in Producing gold shares, if the gold price went up $100, your gold shares would probably go up $200. Why? because It cost $X to produce an ounce of gold.
if it sells for $650, that price minus $X gives profit per ounce. Sell it for $100 more and the profit is $100 more per ounce, cause it still costs $X to get it out of the ground
SO, IF you beilieve gold is going up, buy Gold shares or a Gold Mutual Fund, But beware .this is a volitile sector and hence has it's own particular set of risks. This should contain a small part of your investment portfolio, Most advisor say 5-10 %.
That being said, I am a gold bug, I beleive in gold, but at the moment I own 1 Gold maple leaf coin which I will never sell, I sold my gold shares at gold $680 and am waiting to buy back in as I expect a further drop from here.
When I am happy about the timing, I will go back into shares with $600,000