What Gold Can and Cannot Do For You
It wasn't so long ago when the Euro was flying high and some experts were predicting that the dollar could be replaced as the
world's reserve currency because of
While the Euro has taken a hit, gold has shot up to all-time highs, above
It has never been easier to invest in gold.
Exchange-traded funds have revolutionized investors' access to commodities. "The ease and liquidity of ETFs have really opened up commodities in general as a new asset class for investors," says
Gold can diversify.
A small amount of gold can limit the overall volatility of your portfolio because it often performs differently from mainstay investments like stocks and bonds. "Gold and some other types of commodities are what you call non-correlating assets, so they tend to move independently of overall moves in the market," says
Gold as a reserve currency.
The past few weeks have been a roller coaster ride for stock investors, punctuated by steep falloffs and strong rallies. The market's behavior is partly due to worries that debt problems in some European countries like
The world's primary reserve currency -- the most commonly held currency by central banks around the world -- is still the dollar, but when fear strikes the market, many investors flock to the safety of gold. "It's not irrational that people are buying more gold right now because in the past, you had two reserve currencies, potentially, then you were down to one with the Euro, and now you may be down to none for a while, so gold is really the ultimate reserve currency," says
It has been a good, long run.
The shiny metal set record highs last week. Diehl says he is worried that some investors who are new to commodities may not know what they're getting into. "If fear in the market is at a high and everyone you talk to is saying, 'Hey, you should put your money in gold,' as a contrarian investor, that should be somewhat of an alarm to say, 'Is this really the right thing to do? When everybody says, 'Now is the right time to buy anything,' you can generally feel fairly confident that it probably isn't," he says. A general rule of investing, Diehl says, is to look for asset classes that seem to be undervalued, and gold could be reaching its peak price.
Gold can be extremely volatile.
Gold can provide diversification, but investors should be aware of the risks of investing in commodities. "Gold is really a precautionary hedge and not something your whole portfolio should be in," Zemsky says. He recommends that investors only have 3 to 5 percent of their overall portfolio in gold. Diehl is even more cautious. "A singular bet on gold is, at its core, still a singular bet," he says. "Just as emotions are volatile, the price of gold is a pretty volatile asset."
He suggests finding a fund that invests in a broad basket of commodities and not just in gold alone.
Two popular choices are
10 Things You Didn't Know About the Euro
1. The idea for establishing a single currency in
2. The euro was launched in 11 countries as a virtual currency--used only for non-cash and electronic transactions--on Jan. 1, 1999.
3. Euro banknotes and coins, for public use, weren't introduced until Jan. 1, 2002.
5. There are seven different banknotes. They come in 5-, 10-, 20-, 50-, 100-, 200- and 500-euro denominations. There are eight different denominations of coins: 1, 2, 5, 10, 20 and 50 cents, and 1 euro and 2 euros.
6. Each euro banknote has a standard design on one side and a country-specific design on the other.
7. The euro symbol was based on the Greek epsilon character, representing "E" for
8. Denmark and the
9. Greece has been part of the euro zone, the area comprised of nations that have adopted the euro, since 2001.
10. To date, 16 EU member countries, and approximately 329 million people, use the euro. Nine EU member countries have not yet met the requirements for its adoption.
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