Is It Too Late to Buy Gold?

Gold prices have been on quite a roller coaster ride for the past couple of years and that majority of that ride has been uphill. Even recently, prices were breaking new records continuously as the global economy worsened.

As we know, however, all good things must come to an end–and it’s possible that gold’s upswing will drop dramatically at some point. So from an investment standpoint, is it smart to jump on the bandwagon now? Or is it simply too late to buy gold?

Gold as an Investment

Gold has long been an investment option of choice for savvy investors. Whether purchasing gold stock, certificates, bullion, options or other types of investments in this precious metal, many feel it is a better way to go because it is more tangible than stocks or similar investments.

Experts commonly recommend that investors consider gold as a diversification option within a portfolio. Because the value usually increases at a higher rate than inflation, investors who diversify well try to keep gold in their portfolio to insure one of their investments is steadily inclining.

However, investing in gold does not come without risks. Since this investment is not based on the rarity of gold and instead is based on “speculation,” investors find themselves guessing what the value will be. This, of course, can mean that the cost of gold could easily become overvalued, creating a dangerous bubble.

CNBC’s Take on Buying Gold Today

Economic Troubles Tied to Gold Prices

There’s no doubt investors have initiated a bit of a gold rush in recent times as financial markets showcase significant instability. Because the world stock market has been extremely volatile as a result of the United States’ credit rating drop and European debt concerns, investors have taken refuge in gold.

Subsequently, prices have jumped considerably. They skyrocketed 50 percent over the past year, according to GoldPrice.org. Even more astounding is that by Aug. 20, prices had jumped 25 percent from just one month prior.

Then just a few short days later, the price of gold dropped 5.6 percent to $1,757 an ounce–the steepest percentage drop for the precious metal since March 2008.

The reason for the drop? Investors have grown more confident in the global economy. Recent news that orders for long-lasting manufactured goods jumped 4 percent in the U.S. last month encouraged some investors to sell their gold high after holding on to it for several months.

Is Now the Time to Start Investing in Gold?

Despite the recent drop in gold value, its price is still up 24 percent for the year. For some, this means the gold is still a great investment option, and it very well may be. The only problem is that it’s hard to predict prices because it’s difficult to determine how other investors will view the economy and react as a result.

The other problem is, prior to the drop in value, some experts were beginning to worry about gold becoming a bubble in which prices out-value actual worth.

Matt Zeman, a market strategist at Kingsview Financial in Chicago, told CNN Money that the prices may be increasing too rapidly. “The run-up reminds me of what silver did a few months ago. It climbed steadily week after week, sucked everyone in, and then the whole deck of cards came crashing down,” he said.

Because the price of gold has outpaced inflation (gold has jumped more than 21 percent a year over the past 10 years while inflation has only picked up 2.4 percent over the same period), some say we are indeed in a bubble that could burst any time in the future. When that happens, prices could come tumbling down.

However, the general consensus is that gold prices will remain relatively high for a while as world economies continue to struggle. So individuals who want to purchase gold could still consider this investment as long as they thoroughly research trends, projections and how economies are tied to prices.

And of course, investors could also consider jumping on other so-called safe haven investments like food and metals with restricted supply locations like platinum and palladium, since they are also expected to hold up if the economy collapses.

No matter what the investment of choice may be, conducting plenty of research should be a top priority so you can make the most informed decision regarding every aspect of your portfolio.