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Gold is a precious metal, as well as a symbol of wealth throughout the world.

Expanded Definition

Gold is frequently used as money, or a way to hedge (protect) against inflation.

Inelastic Intrinsic Value Theory

Gold is considered by some to have an intrinsic value that is more or less inelastic, though its price can vary due to speculation. For example, if gold's intrinsic value is $1,000 in today's dollars, and inflation is 5%, then its intrinsic value will still be $1,000 in today's dollars ($1,050 in next year's dollars), regardless of what happens to the supply or demand for gold.

Supply, Demand, and Speculation

Of course, gold supply, demand for gold in industry and in jewelry, and speculation all affect the price of gold. And inflation can cause speculation, or speculation-like panic buying, in gold. The broad array of factors that can go into the price of gold, as well as the lack of interest in gold as an investment during bull markets and bubbles in stocks and real estate, and furthermore the inaccessibility of new gold veins, conflate to form a financially hazardous situation for gold miners most of the time. This, in turn, can discourage mining and diminish supply.

Gold as an Investment

In Stocks for the Long Run, Jeremy Siegel states that the real, inflation-adjusted, return on gold from 1800 to 2001 was essentially 0%, compared to 6.9% for stocks. But there are times when a bear market, inflation, and speculation combine to make gold profitable, such as the 1970's, when gold outstripped the inflation of US$ by about 8 percentage points. After such times, gold goes down in notional value, and much further in inflation-adjusted terms, forming a reversion to the mean.

Gold ETFs

You can buy companies that mine gold, gold bullion, or you can even weigh yourself down with gold chains ("I pity the Fool!" - Mr. T). However, for easy trading and convenience, exchange traded funds and commodities funds provide the ability to participate in the gold market and take care of the hassles of gold ownership and storage. Some even offer the ability to go short. Here are a few choices:

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