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7 Misconceptions About the Gold Market You Need to Know

Understand the investment before deciding to invest

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4) Gold is a Crisis Hedge

In the October issue of Kiplinger’s Personal Finance, Kathy Kristoff said she avoids gold since “no one can provide a good formula for evaluating the right price to pay. Gold is essentially a hedge against fear. When people become worried about the economy or the value of their currency, they bid up gold’s price. But are they $500-an-ounce concerned or $2,500-an-ounce terrified? I know of no logical way of making that call, so I simply stay away.” Gold is not this one-dimensional, but she is right in saying that gold mostly reacts to severe crises, not everyday run-of-the-mill unrest.

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