It appears that gold is being falsely hyped, dipping into people's fears of the future and having them project the prior price rises into the future - the latter is a common investing error. After something has gone us a lot, especially when compared to other investments and measures of economic activity, there is more risk, not less, as there is more of a distance to fall to get back to normal.
The gold prices per oz.:
1970 $37
1975 140
1980 590 (fear of massive inflation at the time)
1985 327 - A decline of 45%
1990 391
1995 387
2000 273
2005 513
2008 865
Est. today 1400 (updated: going to 2000 in 2011
There is a huge downside risk and appears to be little more upside, though anything could happen. The odds just are not in your favor. Be careful of those selling gold and question everything they say.
HOW MUCH SHOULD YOU INVEST IF YOU DO?
Don't count on being able to consider this a liquid asset, as you might hold it after a big decline.
Here's what is more sensible: "I am overweight materials at around 6%-7% of the portfolio. I might have 2%-3% in GLD, 2% in a diversified mining stock which I think of as being partial gold exposure, and 2% in either a chemical stock or timber REIT (depending on the client)." Seekingalpha.com
