As the Chief Investment Strategist for an investment research firm, I'm frequently asked two questions about gold:
1) Can gold really keep going up in price?
2) What's the best way to invest in gold today?
To answer the first question it is first important to state that gold is a form of global currency - it's better than paper money.
It's been used as a global currency for thousands of years - not for reasons of tradition, vanity, superstition - or even policy - but simply because it exhibits the unique qualities that mankind seeks in money as a medium of exchange, and as a store of value.
To quote former Fed Chairman Alan Greenspan, gold is "...durable, portable, homogeneous, divisible..." and so it makes an excellent store of value. Even Mr. Greenspan knows that gold is better than paper money.
This notion of gold as a store of value might be foreign to many people today - but in much the same way that aluminum is particularly good as a building material for aircraft, or cattle are particularly suited for eating, gold is particularly good for holding its value.
Today, the world's governments are engaging in a suicide-pact based on increasing debt levels as a policy. There's literally no problem that leaders appear to think can't be solved without large increases of fiat currency supply. Debt is their policy, and they're resolute in the belief that the underlying problems will eventually work themselves out.
These policies are having devastating impacts on currencies because more money supply means each dollar, peso, or euro is worth less. Yet many leaders seem to believe in their policy so fervently that they're willing to devalue their currencies - relative to one another and to gold - to no end.
Devalued currencies mean gold demand as a store of value increases.
So whenever someone asks me, "Can gold keep going up in price?" my answer is yes, as long as it's priced in currencies that are being devalued.
Given this inevitability, and the reality that gold mining stocks represent the best way to capture gains in the price of gold, it's vital to give your investment portfolio exposure to the market's best gold securities as well as the underlying metal.
So bottom line - yes, I think over the long-term gold will keep going up, with normal corrections along the way.
What is the best way to invest in gold? I recommend a diversified basket of gold ETFs, major gold producers, junior gold stocks and gold bullion. Each has its own advantages, and at different times represents the 'better deal', depending on market prices.
Next week I'll discuss a couple of gold mining stocks that I like. As far as an ETF, I prefer the SPDR Gold Shares (NYSE:GLD - News) to round out my exposure.
Disclosure: Ian Wyatt owns GLD in his personal investment account.
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