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Gold: the Safe Haven Investor vs. the Profit Investor

The opinions expressed by columnists are their own and do not necessarily represent the views of

The internet is overloaded with articles about gold, with analysts and experts attempting to predict which direction the price of gold is heading based on current and anticipated actions or lack of action in United States and in foreign markets, especially Europe. 

The risk of defaults in the Euro Zone raises the stake for all currencies around the globe.  Iran is a tinderbox awaiting the mere spark of a breakdown in an already dysfunctional political effort to expunge the nuclear ambitions of Mahmoud Ahmadinejad through economic sanctions. 

Ben Bernanke is showing his hand that things are not well and more QE 3, 4 or 23 may be coming. Inflation, which is largely ignored by most Americans as long as interest rates are low, seems to slip through to consumers quietly with higher prices in everyday items and sometimes through the things we buy actually containing smaller and smaller quantities. 

Has anyone noticed that a “half-gallon” of ice cream hasn’t been a full 64 ounces for quite some time now? The jugs may look similar, but whenever manufacturers shave off a bit of the quantity, consumers end up paying more for what they need without even realizing it.

Call it what you want, but the only certainty in our world is that we live in a world of uncertainty. If you haven’t figured it out by now, an allocation of precious metals to your overall portfolio is a smart move.  However, the question that you have to ask yourself is – are you a Safe Haven Investor or are you a Profit Investor

While being a Safe Haven Investor doesn’t preclude you from making profits on your position, being solely a profit focused investor puts you in the position of trying to call the relative floors and ceilings of your position in order to secure your return.

Gold is trading at around $1,650, off its early September highs of approximately $1,900, and the Dow is currently over 13,000.  Time to shift back into the stock market, right?  Wrong.  The allocation of your portfolio to gold and other precious metals is an integral part of ensuring that you are well positioned for the continued devaluation of all other U.S. Dollar or foreign currency denominated investments, which is why being a Safe Haven Investor is the right strategy for most allocations to gold. 

The Safe Haven Investor is not concerned with benchmarking their return against an uncorrelated asset class, such as stocks; rather they maintain their allocation to precious metals in order to maintain purchasing power and to protect against significant financial shocks to the market, which seem to be more frequent these days. 

The Profit Investor will spend hours and hours benchmarking returns on their allocation to gold against other investments in their portfolio, which directly defeats the reasons why most investors hold gold in the first place.  In addition, the Safe Haven Investor can benefit from the privacy aspects of owning metals. 

Bottom line, be certain that you decide why you’re taking a position in gold, what the correct allocation is  and what you’re trying to accomplish with your allocation to the yellow metal.

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