Ben Bernanke's words this Thursday lifted the price of gold to a 7-month high. Should you consider investing in gold? Let's first take a moment to see what other investors are doing and gain some perspective on investing in gold mutual funds and ETFs. For a larger picture, you can visit some of these articles I've recently read on MarketWatch:
Why Is Putin Stockpiling Gold?: It's difficult to really ever know what Russian czar Vladimir Putin is doing (and whether or not his actions are logical or noteworthy). Over the past 5 years Russia has doubled its gold reserve. Does Putin anticipate more turmoil and economic unrest in the world? Does he expect the US dollar to continue its decline?
Gold Passes Test and Still Has Room to Run: A trader makes his case that gold does not appear to be ready to break much higher any time soon but there is strong support at key levels that may hold prices up for now.
Gold At Highest Level in 7 Months After Fed: Ben Bernanke's announcement that the Federal Reserve will continue with plans for QE3 gives cues to gold investors that the US dollar will likely decline, the future looks a bit more gloomy that glittery so gold is again the asset to hold for now.
So is now a good time to invest in gold?
The last time I wrote on this subject was 18 months ago when I gave 3 Reasons Not to Invest in Gold Now. I was "wrong" and "right" simultaneously. For some perspective, the price of gold did rise an impressive 20% over the following several months to touch above $2,000 per ounce. However, it gave up almost all of that gain in the months following that high mark. Today gold is higher again but still around 12% off its high mark.
My point is that in times of uncertainty, gold prices can fluctuate dramatically and this volatility is not well-suited for the average investor. A well-timed move in and out of a gold mutual funds or ETFs can bring large gains but a poorly-timed move can bring about some significant losses.