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Monday, March 31, 2008

Why is an investment in gold a good inflation investment?

An Investment in Gold is a Good Inflation Investment ONLY if the Return on your Investment is higher than the Inflation in the same period of time. If you invest in gold and lose 20% of your money in a year and that year the inflation in your country was 2% then your investment in gold was not a good inflation investment.

if you don't know what is Inflation - well, Inflation is an increase in the general level of prices of a given kind in a given currency. Inflation is measured by taking a "basket" of goods, and comparing the prices at two intervals, and adjusting for changes in the intrinsic basket. Gold is not a currency anymore and the Gold Standard is no longer used in any nation, having been replaced completely by fiat currency. Gold Prices are determined only by the market and the price goes down if everybody is selling and the prices go up if everybody is buying. I don't believe there is a relation between Gold and Inflation but I could be mistaken.

It may be good to some investors to invest in Gold now but this does not mean you should invest in Gold. Monex Deposit Company (MDC) is a 30 year old US based company. It allows you to purchase gold or other precious metals for immediate personal delivery or arrange for convenient and safe storage at an independent bank or depository.

Allocate not more than 10-15% of your portfolio to gold. "The timing to buy gold is not important. What's important is how much you allocate. According to me, only 10-15% of your portfolio should be allocated to gold. If you already have that much, do not spend your money on gold anymore."