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An ABCs of Gold Investing Update

January 7, 2008

With a new ground swell of interest in gold now evident, I thought it would be helpful to review the most important steps to becoming a happy first-time gold investor. Making the right decisions up front goes a long way toward insuring the benefits of gold ownership over the long term.

1. Get at least a rudimentary education on gold. This can be done quickly on the internet. It offers a ton of information on the subject. Learn why the public internationally is clamoring for it; why the price has more than tripled over the past six years; and, why many experts expect the trend to continue.

Two good sources of information for the first-time investor are the USAGOLD website and the book, "The ABCs of Gold Investing: How to Protect and Build Your Wealth with Gold."

2. Locate a gold firm to help you sort out your needs and gear your portfolio for the uncertain times ahead. Ask a family member or friend for a reference. At the very least, do a Better Business Bureau records search to make sure you are dealing with a reputable gold firm.

USAGOLD-Centennial Precious Metals has been helping investors add gold to their portfolios since 1973. Recently we were awarded the Better Business Bureau Gold Star Certificate for having no complaints over the past three years. We have been a member for sixteen years.

3. Make sure you own solid gold -- coins and bullion. Don't allow yourself to be convinced that gold stocks, gold futures and options, high-end numismatics, gold ETFs or leveraged gold bets constitute a viable alternative to the real thing. Though each of the options listed can have a place in the portfolio as speculations, none will do the job of protecting your assets like gold itself.

4. Don't get hung up waiting for the price to retrace to a desired level. Such thinking often paralyzes the investor and keeps him or her out of action on the sidelines. If you do not own gold, you are virtually defenseless against the risks now threatening your financial well being. You need to make your move. It's better to own it (and perhaps worry about whether or not you bought at the best price,) than not to own it and worry about taking a major hit due to a currency collapse, credit meltdown, stock market crash, bank failure, etc.

5. Buy enough gold to make a difference. Don't think that a little gold will go a long way. Gold is a form of savings separate from your domestic currency. I am often asked "How much gold is enough?" My response is "How much savings is enough?" That translates to a personal decision only you can make. Our standard recommendation is that 10% to 30% of your portfolio should be in gold. How high you go within that framework depends upon how concerned you really are. Midway in the 1920s Nightmare German Inflation, a crisis many see as similar to what the United States faces today, an individual's life saving of national currency became inadequate to purchase a cup of coffee. Those with significant gold savings, however, not only survived the disaster, but found themselves in a position to benefit once the economy hit bottom.

6. Don't let anyone subvert your interest in gold. Trust what your intuition is telling you. How many potential gold owners during this seven year bull market have been talked out of the investment by friends, family, the press or Wall Street commentators on cable television? In the end, their gut instincts were correct and everyone else, including the analysts, were wrong. Consider that when you buy gold, you are doing something millions of investors have already done before you. Would that many people have purchased gold if the times hadn't warranted it? As long as the world monetary system depends upon currencies whose value is based on faith, gold will be utilized widely as an important portfolio element.

7. Kick back and rest easy knowing you have taken a major step toward securing your financial future. "The possession of gold," Thomas Bailey Aldrich once wrote, "has ruined fewer men than the lack of it." Gold, in and of itself, won't change the world, but it will certainly change the way you view it.

-- Michael J. Kosares

Michael Kosares has nearly 35 years experience in the gold business and is the founder/owner of USAGOLD-Centennial Precious Metals. He is the author of The ABCs of Gold Investing: How to Protect and Build Your Wealth With Gold as well as numerous magazine and internet articles. He is frequently interviewed in the financial press and is well-known for his on-going commentary on the gold market and its economic, political and financial underpinnings.