Commodities for Every Portfolio: How You Can Profit from the Long-Term Commodity Boom

Chapter 11

The Case for Gold in Your Portfolio

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value.

—Alan Greenspan

Never have the world's moneys been so long cut off from their metallic roots.

—Murray M. Rothbard

Most people do not fully grasp the benefits of gold. For some, it is nothing more than a speculative investment. For many, it is simply jewelry. For others, it is just another commodity that will likely appreciate alongside the other commodities. While all of these interpretations capture certain aspects of gold, they fail to truly explain what makes gold an irreplaceable diversifying asset for any portfolio.

This is one of the main reasons why I have decided to write a chapter devoted to gold. I firmly believe that if most investors understood the different reasons for owning gold and the different economic factors that impact the price of gold, they would not have missed out on the threefold appreciation that has occurred over the last several years. More important, understanding the case for gold now will provide investors with a foundation to take advantage of higher gold prices over the next several years.

The other reason I decided to write a chapter on gold is because gold in itself is a strategy. It can provide investors with a hedge against inflation, a hedge against a declining U.S. dollar, and a safe haven during times of political and economic uncertainty. In addition, ...