My own portfolio has gold stock. Why? Because I am a strong believer in asset allocation and keeping extremely diversified. Therefore, I have a little bit of practically everything, whether it be stocks, bonds, mutual funds, real estate, et al. And gold is one of them.

But is it for everyone? Perhaps and perhaps not. Gold has recently had a very strong run, having broken the $400 mark for the first time since 1996. However, the price today is just under half the top of $800 an ounce reached some 20 years. Some experts say that the price is a smokescreen in the whole debate. Risk, or rather the management of it, they claim, is the primary reason why ordinary investors might be swayed by gold's glitter. Actually, when you look at gold against equities and hedge funds, the potential return is rather low. However, because of that very low correlation with stocks, bonds, and real estate, gold could bolster your portfolio when the stock market sinks.

This is precisely why fund managers often jump into the commodities markets — not just to make a fast killing, but to spread their portfolios; it's what we call a hedge against declines elsewhere.

To be sure, as the index of leading shares lost half its value between 2000 and 2003, the price of gold price roared upwards with a stunning 58 per cent recovery from the low of $253.

Of course, it is not only the wandering stock market that pushes up gold. This metal is known to do rather well during times of world tension. Why? Because it is viewed as a haven. The events of September 11 and the conflict in Iraq triggered a flight to safety among investors, which was gold. The fall of the dollar also played a strong part in the metal’s rise. Here's the axiom: when the dollar falls, the gold rises. Actually, in dollar terms, the price of gold bullion has risen by 16 per cent since the beginning of 2003. Moreover, there has been a decrease in mine exploration since 1997 and that means less gold is being produced. Thus, the increase in price.

Where will it go? Analysts expect an average price of $376 an ounce in 2004 with $368 in 2005. Look, platinum is now at a 23-year high and gold is participating in this run towards commodities.

So, for those of you who are considering tossing your lot in, the general forecast by analysts does not suggest a repeat of last year’s rapid growth in prices. I still think that holding gold is a good hedge against any uncertainty with a chance to make money in times of short-term volatility. Of course, consider also that you could just be buying at the top of the cycle. Talk to your own planner about this.

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