Since 2001 however, demand in gold has spiked along with its price. With the price well over $1000 an ounce, a lot more people are becoming interested in investing in gold and an economic indicator. Much can be learned by understanding what the rising dollar price of gold means.



The rise in gold prices from $250 per ounce in 2001 to over $1000 today has drawn investors and speculators into the precious metals market. Though many already have made obscene gains, buying gold per se should not be touted as a great investment. Considering that gold earns no interest and its quality never changes. It's static, and does not grow as proper investments should.

It's more precise to say that one might invest in a gold or silver mining company, where management, labor costs, and the nature of new discoveries all play a vital role in determining the quality of the investment and the profits made.

Buying gold and holding it is somewhat similar to converting one's savings into one hundred dollar bills and hiding them under the mattress, althoughtyet not exactly the same. Both gold and dollars are favored as money, and holding money does not constitute as an investment. There's a big difference between the two however, since by holding paper money one usually loses purchasing power. The purchasing power of commodity money, i.e. gold, however, increases if the government devalues the circulating fiat money.

Buying gold is hedge or insurance against government's tendency to debase its currency. The purchasing power of gold goes up not because it's a so-called good investment; it goes up in value only because the paper currency goes down in value. In our current situation, that means the U.S. dollar is weakening against gold.

One of the characteristics of gold-backed money (one that came about naturally in the marketplace) is that it must serve as a store of value. Gold and silver meet that test, while, but paper money does not. Because of this inherent difference, the incentive and wisdom of holding emergency funds in the form of gold becomes a no-brainer when the paper currency is being devalued. It's better than trying to save wealth in the form of a fiat currency, even when earning some small amount of interest, especially when this interest often attracts the highest taxation rate. The lack of earned interest on gold is not an issue once people realize the purchasing power of their currency is declining faster than the interest rates they might earn. The purchasing power of gold can rise even faster than increases in the cost of living.

It's probably a great idea for you to diversify a part of your savings into gold or even gold-backed securities like the Gold ETF. Investment Advisors recommend that everyone hold 5-15% of their money in gold, although with the present monetary environment, I'd definitely shoot for the top of that range.

I especially like collectible and rare coins instead of ordinary bullion coins. Historically, the US government has confiscated bullion coins. They do not however confiscate historic or collectible coins. For this reason I prefer old, rare gold coins, which don't really have a high premium right now. My favorites are the