Interesting question. These days gold is getting lots of attention as its prices are soaring, but should you jump on the bandwagon and invest in gold? In most situations, I would reply, "No."

I feel buying gold now is not a good idea because of three key reasons:

1. The "big" run up has already happened (Don't forget, most of the "smart money" sells when the masses are buying).
2. Most people are not financially setup or diversified for gold holdings.
3. Gold might not be as valuable to people as compared to other things in a real crisis.

First, let's consider the recent gold run up. Ever the "inflation hedge," gold ran up in the 1980s and then did backslide only to remained relatively flat for 25 years until the recent run up started. If you made the mistake of getting in late the last time, you had a hell of a holding and recovery period. Don't think it can't or won't happen again.

Next, most people aren't financially fit enough (Adequate emergency funds, insurance, basic retirement accounts, etc.) to justify a foray into gold. Most "non-professional" investors should be seeking to cover the financial basics and be sure to diversify their portfolios (commodities like gold fit into diversifcation strategies, but fit in last).

Finally, gold might not be as valuable as other hard assets might be in the event of a real crisis. Before gold, I might go with:

• Medicine
• Water and food
• Tools
• Fuel

This last point of value deserves serious consideration-- gold might buy these necessities, but will you have enough gold to pay the going rate? I happened to catch an old episode of the Twilight Zone over New Year's-- the story line was about some bank robbers who stole gold bullion and hibernated in a cave in the desert for 100 years. As they tried to return to civilization, one man had an adequate supply of water and sold sips for bars of gold. The twist was that gold no longer held value in the future-- I was also struck by the true value of water in the desert.

That still leaves the question of when gold makes sense. I already hinted at the answer to this one. If you are fully diversified, gold and other commodity holdings probably belong in your portfolio, but usually as a small part of the whole (perhaps no more than 5%).

What are your thoughts?

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DDFD believes that self reliance and self sufficiency are the roads to individual freedom.  He is dedicated to living a quality life through frugality, personal growth and productivity, and defensive entrepreneurship.  He also enjoys cooking from scratch and fishing.