It is interesting to read the latest news on the hot topic of what to do with one’s retirement plan and investments, and observe the speculation. While reading an article in USA Today this morning about investing in gold through withdrawing from a 401k, something occurred to me.

Clearly by now if you have read through some of the articles on this site, you can see I am a very big advocate of gold. I also encourage anyone to do their own research on the topic, and not just take my word on it.

Since I based this article off of a news article, warning about investing in gold essentially, I’ve added a few other recent articles about gold for your convenience.

One thing that struck me in the article I just referenced, was how one could interpret something that was said, and perhaps not fully grasp the full picture. It was certainly a nicely written article, and left some nice points for one to consider.

Then there was this aspect in which it said in relation to inflation, gold in essence does not raise in value, in that it’s ‘real return’ is more equivalent to zero.

There is one point to really consider in that, for it’s relatively accurate, although as aforementioned in the article, no one can predict with absolute certainty what gold will do. It may level off some, even perhaps drop a little, and it could also go up in price, or even spike.

Go here for a detailed spot gold price chart

The key to think about here is what that means, in gold remaining in accordance with inflation.

Inflation appears to be the raising of prices, when it’s actually the devaluation of whichever currency is being referenced. So as the value of the currency drops, prices go up.

The interesting thing with this is how gold remains with the same buying power. You can use an example of dollars as a comparison. You can take one ounce of gold 100 years ago, and one ounce of gold today, and it has the same buying power.

(the video at the bottom of this post goes into detail about this if you’d like an in depth understanding)

This is very significant. It does remain the same in that respect, in reference to the amount of goods it is capable of purchasing. Now the dollar amount of gold then and now is $20 vs $1600 give or take. You can clearly see that the buying power of $20 then, became equivalent to the buying power of $1600 today, and what remains unchanged is one ounce of gold, whereas $20 and $1600 do not have the same ‘buying power’ today.

So in reference to inflation, gold remains equivalent. Now when you factor in what historically accompanies inflation, there generally aren’t factors in place to supply individuals with the equivalent dollar amount to compensate for inflation. With reference to dollars, in essence, it works the opposite direction for the worth of that individual’s dollars in a few distinct ways.

Inflation generally has a negative impact on many investments, in their value, and interest rates. As in, real estate will suffer, as with inflation, less people can afford it, then there comes along the devaluation of the real estate that impacts those already invested, and others experience foreclosures and the like, having a double impact, which typically impacts other markets, sending sort of a wave effect through the various sectors.

Something that could offset that is if the medium income rose in accordance with inflation, yet in essence when there is an economic woe at a national scale, employers move in the opposite direction, tightening up expenses and perhaps even administering pay cuts. Then when other prices such as gas are raising, food prices, and then if by chance the stock market under performs, in essence everything only associated with the dollar is deflating.

From that whole perspective, gold in essence is an increase in value, simply by remaining parallel with the trends of inflation, and that isn’t even a guarantee, as there is the chance that the value of gold could go up in value at a steeper rate than inflation, which then in fact it would be increasing in value.

With all that being said, then you can take into account our current economic climate. A number of areas look a bit fragile at present, as in real estate, Wall Street, unemployment, international conflicts, international currencies and the like. There doesn’t appear to be any solid foundation either can rely on. If you were to look through the courses of history, you would be able to pick up that the foundation that upholds all of this is gold.

We don’t need to go into that further, though if you are seriously considering your options, I would highly suggest taking all of this into account. It is ultimately up to you, and it is true, no one can predict any of the above with absolute certainty, yet most of us are at a bit of unease, and there are a number of people whom have invested in gold who feel very secure. They don’t indicate that is their only foundation for portfolio diversification, though they do often indicate that is the most consistent one, along with other commodities.

I recently watched a video that showed quite an enlightening perspective of the trends with gold when compared to another commodity, and a few world currencies. I would suggest watching this video if understanding this better is something you are looking for before making what you’d feel is a rash decision.

Other Articles About Investing In Gold:

This is a recent article from the Telegraph that expresses several points about investing in a turbulent and volatile market.

You will find this quotation towards the end of the article, Mind you they do recommend not ‘reacting’ to a turbulent market. That being said this was the mention on gold:

CONSIDER SAFE HAVENS

Gold was one of the most successful asset classes of 2011 – buoyed by investors rushing from equity markets to the perceived safe haven of bullion.

Last week gold broke its three-and-a-half-year upward trend, falling in price below $1,600 on Tuesday.
But Evy Hambro, manager of the BlackRock Gold & General fund, remains positive.

“The reasons for owning gold – as an alternative store of value, an alternative currency, a potential safeguard against inflation, a source of diversification – appear as relevant now as they did throughout much of 2011,” he said recently.

“Moreover, a negative real interest rate environment, such as the one most major economies are in and which looks set to persist, is typically an accommodative one for gold.”

It is followed by another authority that doubts gold will stand out, so here is where you need to make your own decision, as I am supplying the big picture and most notably shining a light on the variances on speculation.

There was another interesting read on the topic of gold today in The Hindu which was advocating investing in gold. You can check that out too, as it is a bit more in depth than the previously mentioned article, and you can take it all in and make a decision that you feel is best. I have left contextual links for your reading.

If you enjoy reading some of the current articles, here is another from Forbes about ‘Protecting Investments From Inflation’.

To sum it up, it was mentioned how gold is known being highly regarded and was placed number one on the list as an ‘alternative investment option’. So as you can see, there are numerous thoughts on this. Do your research into this. I believe the timing is great for this investment, and anytime is, as for portfolio protection, and a hedge against unpredictable trends that may lay ahead.

Here is an article from the Telegraph where it is anticipated that the price of gold may be pushed up to $2000 per ounce this year.

Here there is speculation about gold associated with the economic climate in Europe, and the global head of a precious metals consultancy said it is possible we could see gold surpass the previous high of around $1900, although it is more likely to happen in 2013.

Here is the same article on Reuters Gold could peak in 2013 after 12-year bull run: GFMS.

This is a recording from BBC UK suggesting reasons one may want to consider investing in gold.

Some thoughts from an executive of a gold mining company, relating to inflation etc.

Here is an article from Bloomberg insinuating that the value of gold may fall as some investors may sell off with concerns about Europe.

This article in Market Watch talks about how the demand for physical gold is strong.

There is mention of how the price of gold has been a bit volatile the past year, there are some expectations in the price raising to $2000 per oz. by 2013. There was emphasis in how China and other growing economies are buying gold, and that it is expected that the demand may continue.

In essence, there are clearly differing opinions on this, and it’s ultimately up to you to take all into account and decide the investment decision that fits you best. It is good to take a look at all the different angles to make a decision that you feel most secure about.