When U.S. government (and similarly, many governments of other countries) is trying to extinguish the financial crisis, flooding the market of large supply of money, everyone begins to wonder how this supply will actually influence the market.
Well, the increased supply of paper money in times of crisis will undoubtedly turn investors to put their purchasing power in some more stable asset, which is not under the control of any institution. Such a position in investment portfolio should be in gold. It represents really the only stable reference point against currency, which supply is based on administrative decisions and not on objective economic phenomena.
Gold in the investment portfolio is a kind of stabilizer, it protects against the effects of inflation and changes in the foreign exchange market. That is why the gold price in any country must be considered in relation to two factors: the global gold price and exchange rate changes.
It should be noted that there are several possible forms of investment in gold, the two most important are:
- Physical metal,
- Certificates based on gold
Certificates based on gold - these are two types: those in which the writer claims that are covered in gold and those that do not have this coverage and are based only on contracts for gold. It is obvious that the latter in an emergency (and whether the current crisis does not prove that the exceptional situation is just happening to us) can not endure and suffer collapse. Then the only way to store the value can be physical gold. It is recommended to keep a certain percentage of the portfolio in physical gold. Some part of the portfolio however - that should possibly respond to short-term changes in bullion prices can be based on the certificates, with full awareness of riskiness of that instrument.
