Diversifying investment portfolio with gold stock

It has been rightly said that gold ‘stands as the protector of property rights’. Look five years back the line and compare the scenario with today. The price of gold has risen radically. No other commodities other than gold have registered such a rise. Buying gold stock thus holds immense significance. Long term investment in gold stock will certainly yield you returns. But then, short term trading is again risky but not as risky as other stocks.

Do you know any rise in the value of the dollar causes gold stock price to fall and vice versa? This is because it is the US dollar that is the medium for buying and selling of gold. In the near future, the US dollar is going to fall dramatically, given its fundamental and technical weakness. Hence, investors can expect to witness significant rise in the price of gold.

In a volatile market, diversifying your portfolio and spreading your money can help you maintain a balance of profits and losses. You can then experience a win-win situation for both the long term and short term. Investing in gold stock is considered by market experts as the most effective way to diversify your investment portfolio. Moreover, gold is considered the most negatively correlated assets to stocks and hence protection of your wealth.

As of May 20, 2012 10:59 am statistics, price of gold was Rs. 28,846/- down Rs. 13. For getting maximum return on investment, especially on intraday trading, it will be wise on your part to not only watch the rising and falling trends but also staying updated with every bit of the up-to-the-minute news at the national and international level related to it.

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Volatility is no wonder the buzzword in the current market scenario but it is no denying the fact that gold stock has maintained its value over the long-term. Of course volatility affects price of gold in the short term. As aforementioned, it is staying updated with the latest news and commodities market statistics not to mention rise and fall of the value of the dollar that you, as an investor in gold stock, can take wise buying and selling decisions.

Gold serves as a hedge against the attrition of the purchasing power of paper money. Even if value of other stocks and bonds, especially traditional paper investments erode, price of gold increases.

Riya Dutt is an Economics analyst and writes reviews on the latest financial news.

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