Editor's note: Not drowning in debt? Have $1,000 to put to work? TheStreet.com senior correspondent and You're So Money author Farnoosh Torabi follows up her takes on certificates of deposit, peer-to-peer loans and Whole Foods stock, with a look at pure gold.
Growing up, I've always preferred silver to gold. My mother assured me that would change one day, as I would grow up to appreciate "the finer things in life." She'd be happy to know that now -- at the ripe age of 28 -- I am discovering that gold does, indeed, have "fine" incentives -- not just in the way of shiny hoop earrings, but as an investment for a diversified portfolio.
This week, let's "play $1K" with one very fine Gold American Eagle Coin (currently around $998).
The Golden Rule
Gold's pretty hot right now, as the commodity is considered a "safe haven" during a weak market.
We hear that rationalization all the time. But why?
For one, gold is viewed as a means to store value when all other financial instruments -- like stocks, funds, the U.S. dollar, etc. -- are losing value. Therefore, it's no coincidence that the price of gold tends to increase amid rising inflation, a weak dollar and higher oil prices.What's more, gold insiders tell me, the precious metal has something going for it that other financial instruments don't: it's not based on a government's or financial institution's promise -- it's not backed by debt. Instead, gold is tangible. You can hold it in your hands and it won't degrade. That -- considering nothing's ever really "guaranteed" by government or the corporate world over the span of history -- is pretty attractive.
Finally, the price of gold can easily run up (or down), considering its small market supply, relative to other investment categories.