Gold Again

Gold was up again today, hitting a new record at about $1,340 per ounce.  It is hard not to comment while running a blog called "Libertarian Investments".  Gold represents sound money, everything that big government is against.  It is really amazing that gold is at all-time highs (at least in nominal terms) while mortgage rates are near all-time lows.

So what should we be doing right now in terms of gold and how it fits in with our investments?  If you don't have any gold or gold related investments in your portfolio, do what you can to get some as soon as possible.  Every portfolio should have some exposure to gold at all times.

If you have some gold, let's say 10 to 20 percent, then it would be wise to increase your exposure a little bit, but you should wait for dips to buy.  Needless to say, today would not be considered a dip.  But you shouldn't sell with that amount, especially in today's frightening environment.

If you have over 25% of your portfolio in gold and gold related investments, you might actually consider selling a little bit.  You might ask why a libertarian would sell his gold.  First, just because gold would be the most likely choice of the market in a free market for money, it doesn't mean we are in that situation now.  Whether we like it or not, the U.S. dollar is the money we use in the U.S.  If you try to shop at Walmart or your local grocery store with gold coins, they will look at you like you're nuts.  You still need U.S. dollars as that is what acts as money in our world today as it exists.

Second, you should consider selling a small amount of your gold investments (if you already have a lot) because it is good to take some profits off the table, even if those profits are denominated in dollars.  Think of it this way - if you sell a little gold and the price goes down, you will be able to buy back even more in the future.

Gold is making a good run (while the dollar declines) and it is not surprising.  At the same time, we shouldn't be surprised if there is a pullback below where it is now.  The bond market doesn't see price inflation right around the corner.  The gold market may be telling us something different.  Is it acting as the canary in the coal mine or is it a false alarm?  Only time will tell.