Thinking about investing in gold? Gold has historically been seen as a wise financial investment, and this discussion about buying gold will show you why gold has the best reputation of any precious metal for investors.

The gold standard
Of all the precious metals, gold usually gets singled out as a symbol of the very best material that’s available. Historically, the value of gold has always been high. Throughout history, gold has been used as currency, and even when countries stopped melting their gold down and pressing it into coins, they still backed their paper currency with the precious metal. That’s where we get the phrase “the gold standard.” For a long period of time, this literally meant that actual gold was sitting around in a vault somewhere to guarantee the value of each piece of paper money a government issued.

Though countries don’t back their currency with gold anymore, the precious metal is still seen as one of the most solid and valuable investments. The reason is partly psychological and partly because of its rarity. Gold is shiny, highly reflective, and it looks like the sun; it is literally beautiful. Because people have always been attracted to it aesthetically — and we’ve always associated it with civilization’s most wealthy kings and some of history’s most amazing treasures — we’ve always valued it more than other metals. And, because it is rare, it remains a valuable commodity.

Why invest in gold?
Buying gold has always been a pretty solid financial investment. Experts say investing in gold is a good way to diversify your portfolio and protect yourself from extreme losses in the stock market. They often recommend that investors keep five percent of their portfolio invested in gold or gold-related securities.

More than just a safe investment, gold can be a very profitable one. That’s because when stocks and bonds have lost value dramatically, gold has historically increased in value. In fact, following the 2008 credit crisis, the value of gold climbed repeatedly and reached record highs. And in 2010, the price of gold increased by 27 percent, while the stock market grew by only 11 percent. With numbers like these, it’s not hard to understand why investing in gold is such a popular option in times of economic crisis.

How to buy gold
If you want to invest in gold, there are two ways you can do it. One way is to invest in gold-based financial instruments. That means you invest in gold through the stock market rather than trading cash for a physical piece of gold. Buying gold this way is a good option for some people because it allows them to reap the financial benefits of investing in gold without having to worry about storage and security concerns.

But you can also go out and buy a real gold bar or coin if you want. Many investors purchase gold and then keep it in a safe deposit box, a home safe, or even hide it around the house. (This isn’t recommended! If the gold is stolen, it can be melted very easily, making it almost impossible to identify and recover.) If you choose to buy gold bars and coins, you should research to make sure you’re dealing with a reputable dealer. One way to do this is to visit the World Gold Council Web site, which helps investors learn where to buy gold.

The gold bubble
While investing in gold may sound like a very attractive option, it is important to note that buying gold — like buying any other investment product — comes with risks. The risks may be low, but economists say that it is possible the gold bubble could burst one day. If too many people decide to start buying gold, the gold market could collapse and the value of gold could go down. That’s why experts advise the wisest way to buy gold is to use it to diversify your portfolio — and not pour all of your money into the precious metal.