Invest in Gold?

With the US dollar under pressure, the normal rationale would be to buy gold.  However, the market is now more concerned about deflation than inflation in the near term - so is it a wise decision to invest in gold at this time?

Gold spiked to a record high of about $1,030 an ounce early 2008 but it is argued that it was due to a surge of strength in commodoties, rather than an increase in actual value.  It decreased to a low of about $680 in November to a little above $800 recently.  

"In his outlook report for 2009, Dave Meger, managing director of metals services at Alaron Trading in Chicago, cited questions he has received as to whether gold is still a safe haven asset—and if so, why the metal hasn't performed better during the recent economic tumult. Meger believes gold remains a safe haven asset and says it has weathered much smaller percentage decreases in price than have other commodities while avoiding the extreme volatility seen in other financial instruments. In fact, some of the selling pressure has been the direct result of gold's function as a store of wealth with easy liquidity, he points out." - Business Week

It seems like most economists agree that at least the first half of 2009 we will still be in this recession - with many economists believing that we will not get out of it until late 2009 to early/mid 2010.  

Many investors are still using it to diversify their portfolios, or even increasing their allocations to gold.  However, historically gold does not offer high returns and the economy is predicted to rebound within 1-1.5 yrs.  

So why invest in gold now?  Do you think we will experience deflation in 2009?  Where would you put your money?

Author: Carrieanne L.