We Recommend Gold as an Asset Diversifier Most portfolios today are invested far too heavily in stocks and mutual funds. Throughout the 20th Century, financial experts have recommended investors hold a balanced portfolio of financial assets including stocks, bonds, mutual funds, real estate, and hard assets including gold, silver, platinum and rare coins. The purpose of diversification is to protect the total portfolio against fluctuations in the value of the other assets.
Gold does exactly that.
Economic forces which determine the price of gold are different from, and in many cases opposed to, the forces which determine the prices of most financial assets like stocks. The price of a stock depends on the earnings and growth potential of the company it represents. Likewise, the price of a bond depends on its safety, its yield, and the yields of competing fixed income investments. The supply and demand for gold, inflation, the status of the U.S. dollar, and interest rates. While the effects of these factors are somewhat complex, the important point to remember is that they cause the price of gold to move independently of the prices of other assets in a portfolio.