How to Protect the Wealth with Gold in These Days?

by Liliane Waldner

The financial crisis goes on. Nobody knows where it ends. There is still not enough confidence in the 700 billion Dollar efforts of the United States to rescue the financial market. Citigroup has needed a $306 billion rescue plan in order to survive. Meanwhile the Fed has been forced to top this effort with 800 billion Dollars in order to unfreeze credit for homebuyers, consumers and small businesses. Market observers fear that the financial crisis could sweep over to the consumer credit market. US households have increased their debts for about 8 trillion Dollars during the recent decade. Is that the next grenade that is going to explode?

Gold Looks Appealing in These Days

Hoarding gold has always been a proven strategy during times of crisis or war. This has always been a currency that could be used anytime and anywhere in the world. Now, have a look, what has happened with gold recently. It has touched the 800 Dollar mark on Friday the 22nd of November and it has continued to stay above the 800 Dollar mark during the following days. It hit already the 1000 Dollar mark during spring and it reached over 900 Dollar during end of September and beginning of October. It has fallen below 750 Dollars after the governments of the United States and big European states have launched their rescue plans for the financial markets. Now it seems that gold is back again. Is there not enough confidence in the measures that have been taken?

A Sign of Lack of Confidence to the Financial Markets

The new increase of the gold price could be an indicator that the crisis is not over yet. There is not enough confidence in the markets. There is a lame duck government in the United States. Rounding up the situation we see a weaker Dollar, while the Oil price starts to increase again. Now, we come to the question, if it is recommendable to invest a part of the assets in gold? It's a way to protect the value of the assets or a speculative mean to make money. There are not many attractive alternatives in these days.

Pros and Cons of Gold Investments

The pros of investments in gold are the diversification of the portfolio and the fact that gold is a scarce and limited commodity. The problems on the financial markets could go on for a while and thus the gold price increase furthermore. I have read recently the opinion that the gold price could climb to around 2000 Dollars.

The cons are that it is always wise to be careful, if a lot of sources recommend a certain investment. The gold price was around 300 and 400 Dollars during the Eighties and Nineties and it started to increase to the actual level during the actual decade. If the inflation were considered, the gold price, however, would have been higher than 400 Dollars to the actual prices.

The best way to buy gold is physical as bullion. Another fine solution is to buy ETF's Exchange Traded Funds in gold. ETF's offers an opportunity of buying the rights on gold and to benefit from a prosperous development without hoarding physically gold at home or in a bank safe.

Gold and environment

Gold is not an environment friendly asset. Mining gold causes serious contamination of water, because the miners use mercury in order to extract the gold. This is the ugly side of the radiant story of gold. We should be aware that we can hoard gold, but we cannot drink and eat it. King Midas of the ancient Greece has experienced it in a painful way. Everything what he has touched has been converted in gold. Life became hell to him. People are invited to tell their opinion about gold in the forum of Make Money Tip. The website is: Make Money Tip

Liliane Waldner

About the Author

Liliane Waldner is a business economist. She lives in Zurich. She has been in a member of the parliament of the State of Zurich during 17 years. She has attended the board of several public entities and companies, some of them dealing with the financial markets. Her website is: Make Money Tip