Why gold is a must-own investment

It might not make sense, but there is no denying the attraction of the yellow metal.

By Jamie Dlugosch Sep 22, 2010 12:10PM

Gold © Comstock Images/JupiterimagesIn 2008, I suggested one stock that investors must own in their portfolios.

 

No matter what was transpiring in the overall economy or market, this particular company knew how to make money and would continue doing so for many, many years.

 

The name of that stock was Apple (AAPL). At the time, shares traded for less than $100 each.

Now you can buy the stock for just under $300 per share. Is there a similar investment story today?

 

You bet, and the answer may surprise you. It certainly surprised me.

First, let's talk about what it takes to be a must-have investment. I don't throw the term around loosely. In fact, for the most part, I believe that there is no such thing as a must-have investment.

 

A must-have investment requires that money will be made no matter what. It is an absolute certainty that profits will be had.

When it comes to investing, there is no such thing as an absolute guarantee. That's why I so rarely make the claim that an investment is a must-own.


With that said, in reviewing the current market environment, I have found the next must-own opportunity.

 

Drumroll, please . . .

 

The answer is gold.

There, I said it. For people who know me, you understand how difficult it is for me to utter that word.

 

I don’t get gold or the attraction.

 

It has no meaningful use, only aesthetics, but investors have always put gold ahead of any other form of currency. It might not make sense, but there is no denying the attraction of gold.

 

Today, owning gold is a solid guarantee to make money or, at a minimum, not to lose money. Here's why:

 

The United States is in a financial box. Escaping the crushing load of debt requires tighter-than-normal policy putting pressure on the dollar. A dollar that drops in value increases the value of commodities like gold.

On the flip side, too much stimulus creates inflationary pressure. Too many dollars chasing too few goods results in rising prices.

 

And that is the Holy Grail for gold.

 

You cannot lose.

 

Tight and fiscal responsible policy pressures the dollar lower, and gold prices rise.

 

Loose and irresponsible fiscal policy puts too many dollars on the market, and gold prices rise.

 

That dynamic is likely to last for the foreseeable future. Even with gold at record highs, there is compelling evidence for the commodity to continue its ascent.

 

Owning gold should be part of any prudent portfolio, no matter what is happening in the market. You can get exposure to gold with the SPDR Gold Exchange Traded Fund (GLD).

 

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Tags: ETFgold
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