Gold recently touched a 25-year high, and while it has backed off its peak, experts say a major decline is unlikely. Still, with money pouring into exchange-traded funds pegged to gold, you might wonder whether your portfolio could use a bit more sparkle.
There are plenty of good reasons to own gold. Like real estate and other commodities, precious metals can work as a hedge against inflation and serve as important diversifiers because they don’t move in lock-step with stocks and bonds. But at its current level, gold might not be such a great buy, and the volatility of its price makes it a dangerous bet for small investors looking to turn a quick profit.
“The worst reason to buy something is because you see it in the news,” said Michael Iachini, senior research analyst with the Schwab Center for Investment Research. “Don’t buy it because it’s hot, buy it because you think it’s a good investment for your portfolio. An individual investor should not be trying to speculate on the price of gold.”
