Since 2001 however, demand in gold has jumped and so has its price. With the price now over $1000 an ounce, a lot more people are becoming interested in gold as an investment and an economic indicator. Much can be learned by understanding what the rising dollar price of gold indicates.

The rise in gold prices from under $300 per ounce in 2001 to over $1000 today has drawn investors and speculators into the gold market. Though many already have made obscene gains, buying gold per se should not be touted as a great investment. After all, gold earns no interest and its quality never changes. It's static, and does not increase as sound 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 bed, althoughtyet not exactly the same. Both gold and dollars are considered money, and holding money does not constitute as an investment. There's a big difference between the two however, because by holding paper money one always loses purchasing power. The purchasing power of commodity money, i.e. gold, however, goes up if the government devalues the circulating fiat money.

Hoarding gold is protection or insurance against government's tendency to debase its currency. The purchasing power of gold increases not because it's a so-called good investment; it increases in value only because the paper currency decreases in value. In our present 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 business) is that it serves as a store of value. Gold and silver meet that test, while, but paper money does not. Because of this profound difference, the incentive and wisdom of holding emergency funds in the form of gold becomes smarter when the official currency is being devalued. It's more attractive than trying to save wealth in the form of a fiat currency, even when getting some nominal interest, especially when this interest often attracts the highest taxation rate. The lack of earned interest on gold is not a problem once people figure out the purchasing power of their currency is declining much higher rate 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 good idea for you to diversify a portion of of your savings into gold bullion or even gold-backed securities like the Gold ETF. Experts recommend that everyone hold 5-15% of their money in gold, although with the present economic environment, I'd absolutely go for the top of that range.

I particularly 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 and rare gold coins, which don't really have a high premium right now. My favorites are the