Prospecting for Gold

Here’s how much bullion to add to a diversified portfolio and hedge against falling currencies

For this reason, Benz says one option is the iPath DJ-UBS Commodity Index TR ETN (DJP), which spreads its assets across a basket of other commodities—oil, copper, and corn—in order to track global markets for natural resources and raw materials.

There are several approaches to investing in gold on the market depending on your overall aims. One is to hold exchange traded funds such as GLD that trade like stocks and invest directly in gold bullion. That works best if you’re looking to hold a stake in the precious metal itself as a way to protect your portfolio from inflation or panic in the financial markets.

A second tactic is to buy shares in gold mining companies, essentially a bet that growing demand for gold will translate into profits for companies such as Barrick Gold (ABX), Newmont Mining (NEM), Goldcorp (GG), and AngloGold Ashanti (AU). The ETF Market Vectors Gold Miners (GDX) is one way to spread your money in all the major mining companies. Mutual funds are also an alternative for the sector. Two, First Eagle Gold (FEGOX) and Tocqueville Gold (TGLDX) have earned four-star ratings from Morningstar.

Both offer investors exposure to both miners and bullion. The downside to this strategy, however, became apparent this year when fuel and labor costs dragged miners down. A Morningstar category average for equity precious metals funds was down nearly 21% for the year, a far cry from the run-up in gold prices over the same period.

Johnson remains steadfast. He points out that inflation could develop soon since Western governments including the U.S. are busy accumulating debt. “Paper money isn’t backed by anything of value,” he wrote in an article in October. “It should strike [investors] as ominous that when a real asset was in demand, gold was held in the highest regard.”

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