Gold: In good company
"If there was ever a better scenario than the present to support rising gold prices, it's hard to imagine what it might be," says Leonard Goodall, editor of No-Load Portfolios. Here's his review.
"Unlike most other metals, gold has limited industrial usees, so its price tends to be based on other factors influencing demand, such as jewlery use and as a hedge against inflation, a falling currency and fearful uncertainty.
"Massive Federal deficits for many years to come, tax increases on the horizon, a global financial system in crisis, a plunging stock market, Treasury bonds in a bubble and falling commodity prices all combine to spread fear among investors.
"Perhaps the best way for an investor to think of gold is as an insurance policy against the potential negative effects arising from the risks we face or may face in the future. As such, a modest holding of gold (10% or less) is probably an appropriate addition to most portfolios.
"Buyers of gold have choices, with coins or bars, ETFs and gold mining stocks being the most popular for the average investor. Psychologically, it's hard to beat the feeling of holding gold in one's hands. However, there are the downsides of security and liquidity.
"Exchange-traded funds are probably a better choice for most investors. The SPDR Gold ETF (NYSE: GLD) provides fractional shares of gold bullion that is held in a London vault.
"If you would rather invest in gold mining company, the Market Vectors Gold Miners (NYSE GDX) invests in the stocks of these companies.
"If you decide to invest in GLD. you will join some other well-known investors. The Wall Street Journal recently reported that Greenlight Capital bought 3.7 million shares in the fourth quarter of 2008.
"In addition, Pequot Capital has about 10% if its $4 billion of assets in the ETF, the University of Notre Dame has $90 million, the Teacher's Retirement System of Texas has $30 million and Winward Invetsment Management has about $232 million in SPDR Gold."
For subscription information, contact Leonard Goodall, 8635 W. Sahara, #420, The Lakes, NV 89117
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