Others cite its volatility as a negative factor, because its price is affected by fast-money traders lured by the leverage of commodities contracts. The price can tumble just as quickly as it rises.
Still, even some conservative managers recommend a small allocation in gold as part of a balanced portfolio. EverBank's Trotter puts his own account at 5% to 10%
How to buy
Here are three ways to invest in gold:
1. Buy funds: If you are looking for a way to invest in gold, one of the easiest ways to do it is to buy an exchange-traded fund, such as SPDR Gold Shares (GLD, news), iShares Gold Trust (IAU) or Market Vectors Gold Miners (GDX), which tracks gold miners. And there are ETFs that are tangentially linked to gold, such as Physical Platinum Shares (PPLT), along with ETF baskets of precious metals, such as Physical Precious Metals Basket Shares (GLTR), which holds gold, silver, platinum and palladium.
The advantage that ETFs have over mutual funds is that they are easier to trade and ETF costs are usually lower. But the downside of investing in a gold-related ETF is that the gains are not always direct and can sometimes lag the rise in gold prices. The risk is that prices can rise and fall quickly.
Conventional mutual funds may be more appealing to buy-and-hold investors. The $100 million Midas Fund (MIDSX), which is highly concentrated in mining stocks, saw significant inflows last week, although manager Tom Winmill wasn't specific. "Gold is not a way to maintain capital appreciation, but it's a good way to preserve wealth," he says.
2. Buy stocks: Another way to play gold is to go straight to the source -- gold mines. While prices for physical gold are soaring, gold mining stocks have slumped. Winmill likes Freeport-McMoRan Copper & Gold (FCX, news), which is one of the world's largest mining companies. Year to date, the stock is up only about 5%, "even though revenues and earnings are exploding on the upside," Winmill says.
"A lot of people are thinking the world is going in reverse, but global gross domestic product growth -- if you include emerging markets -- is 7%. And a lot of that emerging-markets-growth has to do with infrastructure build-out, which demands copper," he argues.
Winmill also likes Goldcorp (GG, news) and Newmont Mining (NEM, news), which are some of the largest holdings in the Midas Fund. He sees a "Slinky effect" for mining stocks in the coming months -- "They'll bounce back and make up for lost ground as well," he says.
3. Buy hard assets: The upside of buying actual gold bars and ingots is that when the price of gold rises, the value of a gold block tracks the gains on an almost one-for-one basis, unlike other assets that track only the value.
"People want to put their money into hard assets, which retain a value when currencies lose value," says Tod McElhaney, the president of LaSalle Futures Group in Chicago.
But while physical gold has the most direct value, the downside is that it is also more difficult to offload should investors want to let go of the asset.
One way to buy physical gold is EverBank's pooled gold and silver accounts, which let you pool your investment with those of other investors. The advantage is that you don't have to cough up huge sums -- the minimum investment is $5,000 -- nor do you have to pay storage, delivery or annual fees to stash your gold. The ideal investor? "Someone who doesn't have an apocalyptic view that they need to have it in (their) backyard," Trotter says.
