The answer depends on what type of investor you are, and what kind of investing you want to do. I listen to a lot of talk radio, and all I hear are commercials from talk show hosts endorsing gold as an investment. Do any of these talk show hosts really do any research about whether gold is a good investment? Gold has been hot lately, as it rose to about $900 an ounce, which has probably made it literally a hot commodity lately. Learn three things about gold, and you’ll know whether it’s something for you to put your money in.

Gold has an inverse relationship to the dollar and the stock market.

When the stock market is down and the dollar is weak, gold goes way up in value. Right now you have a lagging stock market and a weakening dollar, so that is why gold is hitting record highs in value. Gold brokers will always pitch that if “the world goes to hell and chaos breaks out, gold will be the standard”. Don’t buy into this sales pitch. If inflation sky-rocketed, and we started wiping our butts with $20 bills, we would be bartering goods and services, not using gold. It’s silly to think that gold would just replace the dollar as the currency of choice if the stock market crashed. You would see more people trading their services for goods and vice versa.

Gold is a better short-term investment than a long-term investment.

Because gold depends on the economy to be in a slump, it tends to be a good hedge investment for the short-term, because you can make a big chunk of money in a short period, but also lose a lot in a short period if you don’t time it right. Gold is simply not a good long-term choice. It has historically been outpaced by inflation over a period of time longer than 10 years.

Gold is very volatile and not for the faint of heart.

If you’re going to dabble in gold investing, realize that it’s very volatile. It has all of the volatility of single stocks, but it has the returns of a bond. It can go up very fast, or go down very fast too. So prepare yourself for a bumpy ride.

If I were giving someone advice who was interested in buying some gold coins as an investment, I would say don’t let more than 5% of your investment be in gold. If you’ve got some money to throw around, and you want to have some fun with it, buy some gold and you might just make a quick buck. But, don’t buy it thinking it’s going to take care of you during your “golden” years. Wow, that was cheesy.