Gold has been touted as the historical hedge against an inflated currency. Today, investors are scrambling for gold to protect their assets against a credit crunch, recession and possible stagflation. As gold nears $1000 an ounce it is time to consider how to invest in precious metals and just which metal is best for a dollar hedge.

Gold is the universal currency. Before 1971, US Dollars were legally backed by gold reserves (legally, certainly not entirely). Today most currencies, with the exception of the Swiss Franc, are fiat; their value coming from the faith in the governments that issue the currency. Before Bretton Woods in 1944 and the global shift from gold to dollars, gold was used as a way for governments to balance deficits at years end.

Gold is still considered a hedge to rampant inflation and recession. Gold’s value is intrinsic, the value of one ounce of gold does not change, the value of currency changes relative to gold. At least that is the view of most economists.

While gold may provide a nice hedge to a falling currency, silver is a much better investment than gold. Silver is used in thousands of products and has a heavy demand stemming from its use in traditional photography. The demand for silver is up dramatically in the last few years, without government and institutional sales there would actually have been a silver deficit last year.

Silver also benefits from a lower per ounce price. While gold costs $990 per ounce, the price of silver sits at just about $20 per ounce. The sticker shock of gold prices is likely to occur in the $1000+ ounce area while silver has much room to gain before sticker shock sets in. Sticker shock is likely to keep gold prices from ever hitting new territory while silver has room to tack on extreme percentage gains before the same price shock sets in.

Silver’s main advantage might come from the futures market. Short sellers on silver are all over the place and some analysts think that the amount of shorts is greater than the world supply of silver. As short sellers start buying to cover their positions, the explosion in silver prices will likely follow. Too many positions have to be covered and by only one method- purchasing silver on the open market.

The greater demand, smaller price and the market dynamics of silver make it a far superior investment than that of gold.

The new commodity boom might just be in Gold.  Gold has moved from $660 last August to $950 today, nearly a 50% gain.  As worries of inflation grow, prices for gold and other commodities are likely to skyrocket.

There are many ways to invest in gold.  First is the physical ownership of gold bars.  These can usually be purchased at almost any coin shop or online at various gold reserves.  Physical gold is often the most expensive, ounces can be marked up nearly $20 per ounce just to cover the day to day changes in gold prices.  Of all the ways to purchase gold, direct ownership is the most expensive and illiquid of them all.  While you can trade physical gold for anything, it is unlikely that stores near you will be accepting gold in the near future.  Physical gold is the most safe, as it is in your own possession and not affected by the closure of banks or reserves that might otherwise hold your gold.

Next method of purchase is through a gold futures or commodities account.  These accounts usually require thousands of dollars to fund up then take more investment knowledge to trade.   You usually aren’t trading the actual physical gold, but the option to buy gold at a certain price.  Gold futures and options can be difficult to trade and understand and in some cases are not backed by physical gold.

The easiest method, and the preferred method is to purchase stocks that deal with gold in mining or refining for industrial use.  These companies own direct access to gold and have the metal as an asset to back them up.  While gold prices have risen 50%, most gold companies have seen their profits and market capitalization rise even more than 50%.   These positions are seen to be leveraged, a difference in $20 in gold can easily double the profitability of a company pushing the stock value higher and higher.  Gold miners also pay a dividend on their stock, which is another reason to buy the company rather than the gold.  The unfortunate disadvantage is that the value will be determined by the corporate news, if your investment starts going under it will be due to the market rather than the business.

All in all the best way to gain exposure to gold is an investment in the mining companies.  As gold prices rise, the value of gold miners and other companies in the industry will far outpace the rise in gold price.  Gold corporations will also pay dividends for your investment, something that physical possession and futures will not.  All in all, buying stocks in gold miners is the best bang for your money.

It is possible that you have heard ‘leave the investing in gold to the professionals’. Don’t listen to that, they just don’t want you to have a piece of this profitable pie.

The interesting thing about gold is that it is a commodity and doesn’t earn interest like your regular investments but is based on the profit you can get if you can sell it for more money then you paid for it.

One way to invest is to invest in Gold bullion around the world with American Eagle, the UK Britannia, or Australian Nugget to name a few. Gold coins are invested around the world on a daily basis with a ready market. Value is not only based on the gold content but their artistic beauty.

You could choose to invest in gold mining companies. You will need to do some research into the companies you choose and determine their future prospects in terms of potential and growth of the company. With gold mining mutual funds you could diversify with a few gold mining companies around the world to lessen your risk.

lthough the gold market seems to be a volatile one, you have to consider that gold is immune from factors like economics because of the worldwide interest.

Gold is being invested somewhere round around the world every minute of the day in London. New York, Tokyo, Zurich and Hong Kong to name a few, it’s a case of being in the right place at the right time.

Gold is not just for jewelry but for things like satellites and other objects that need its soft alloy quantities. It is needed by many countries all around the world and is a liquid stock, as it is being bought and sold all the time so when the time is right it is easy to get rid of – an investor’s dream.In 2001, average price of gold was $274, in 2005 it was $445. As of today, gold is worth around $770.