If you buy gold better hope the economy does not pick back up.....
That doesn't really make sense.
Gold isn't a hedge against a bad economy, it is a hedge against inflation. And you can have inflation in a great economy. In fact, the recent run-up in gold prices (over 12% in the last few months) means that a lot of investors with a LOT of money are betting on a hefty dose of inflation in the future, no matter what the stock market or economy does. And guess what... one major source of that expected inflation, the health care bill, is making progress in both chambers of congress. No matter what sort of bill passes, it will put the govt deeper into deficit spending and taxes will rise. More debt will eventually mean the money supply must go up, and that means the value of the dollar goes down. Commodities keep their value no matter what the value of the dollar, and that's why commodity prices are rising, because the big investors are banking on an inflationary period.
You may or may not agree on those points, but who cares. The fact remains that the price of gold is going up out of fear of inflation, and the rise is rapid enough to indicate that major players are involved in buying gold even though the stock market has nearly erased the losses from 2 years ago. This situation, a rising stock market combined with fearful "big" investors pouring money into gold, is a fact beyond dispute.
As far as the mechanics of investing in gold... You have a couple of basic options if you want to start right now.
First, if you prefer physical risks with your investment instead of trusting mutual fund managers and other factors, you can just buy gold coins and keep them somewhere safe. There are online sources, or you can find a reputable coin shop near your house and just buy from them. Keep in mind that the federal govt is scared about people doing this, so purchasing more than $10,000 in precious metals each calendar year must be reported to the govt. Risks involve not only the usual risk that the price of gold might go down, but also include the chance of getting robbed. You can keep your gold in a safety deposit box, but the fees on a safety deposit box in most banks will eat cash. But since you're buying gold because you don't trust that your cash will be worth as much tomorrow as it is today, spending cash to preserve a physical asset like gold is actually not that bad of an idea. I know a few guys who are very concerned with the future of the dollar, and they are regularly buying gold coins... with cash, to avoid any records of the purchase. A bit paranoid, but if things go to crap they'll be doing better than most.
Second, you can invest in precious metals mutual funds. I personally invest in the USAA precious metals and minerals fund, and it has given me some huge returns over the last couple of years. This is "safer" in the sense that as long as you invest in a fund that isn't run by crooks, it is unlikely that your money will be stolen. The investment risk that the fund will decrease in value is at least as high as the risk that the price of gold will drop, plus you are more subject to short-term fluctuations in market values because you are directly exposed to the effects of other investors moving money in and out of the individual investments that the fund has invested your money in. Also, many of those precious metals and mineral funds will invest in non-US companies or in US companies with assets held outside the US, and as we all know from the example set by Venezuela recently, some governments have no problem with nationalizing privately held assets like oilfields and mines. So a mutual fund is also exposed to risk from loss of assets due to government seizures. And guess what - if runaway inflation actually occurs, you are more likely to see governments take desperate actions like seizing the assets of US companies.
There are other options (buying gold and having a third party hold it for you, buying gold-backed securities or bonds, etc), but these two are the easiest basic options for the little guy. As others have said, you MUST do your research first... Personally, I've done enough research recently to know that a lot of very smart and very rich people are buying commodities, and the price of gold has been steadily climbing as a result. Yea it might go back down, but the way our country's finances are going I don't think even a resurging economy will do much to hold back the inflation that will inevitably occur as a result from the current US government spending plan.
Finally, if you're not comfortable holding gold coins, I recently read that the price of silver is abnormally low when compared to the price of other commodities. Buying a stack of real silver dollars from a coin dealer is a good way to get your feet wet when it comes to buying precious metals. They don't need to be from a mint or in "proof" condition either... Silver in the form of tarnished bulk coins is essentially the same as buying silver bullion, but the coin format can make it easier to buy and sell because it is in a commonly accepted form, weight, purity, etc. and prices ought to be pretty well universally agreed upon at the time you buy or sell.
