It's been a roller-coaster year for the markets, sending many investors into the arms of a seemingly safe haven: gold. This hot commodity now gets regular media coverage as it continues to outperform with record highs. But, what goes up must come down, begging the question: what should you do about gold now? (For related reading, also check out 8 Reasons To Own Gold.)
IN PICTURES: 5 "New" Rules For Safe Investing

Below are a few tips from market experts on things to look for when deciding whether you should stay in the gold game or take the money and run.

Gold's Backstory
While you may have just tuned into the media hype surrounding gold in the last several months, it's nothing new. The summer brought stock market rallies and losses, and fear began to spread about the future of major currencies like the euro, due to debt concerns in Greece and other parts of the European Union.

Cash used to be a safe haven, but gold has become the new hedge against a falling dollar. Market fears like the issues mentioned above tend to send investors straight into the arms of gold; it's the one thing that will hold a steady value in the face of eroding currency brought on by government and banking instability. Because of its tendency to move independently of the market, having gold in your portfolio can oftentimes offset volatility in other investments, like stocks. This literal "gold rush", in addition to demand from emerging markets, has sent the value of gold soaring more than 20% this year.

But there are no investing guarantees, and in that sense, gold is no different. It can be volatile. A wise strategy is to make sure that you hold no more than 5% of gold in your overall portfolio. And now that it's literally become "the golden child", it's even wiser to wonder when to back out of the game. The general rule of investing, after all, is to look for undervalued asset classes. On the contrary, gold could be reaching its peak price.

When gold hit $1,000 an ounce several months ago, speculation that the peak was upon us began. In October, gold has risen above $1,300 an ounce. Now some analysts believe it could even hit as high $1,600 an ounce.

The Future for Gold
Citigroup recently revised its short- and medium-term gold forecast to $1,450 per ounce, pointing to safe haven demand for gold in light of ongoing concerns over global currency and deflation. However, analysts went on to say that they have "less conviction for sharper moves one year from now". Likewise, Natixis, a French investment bank, predicts that the gold price will slowly fall in 2011 as the global economic recovery continues. Accordingly, it predicted the gold price will average $1,050 in 2011.

IN PICTURES: Top 6 Uses For Bonds

Interest Rates
Unlike many investments, gold is tangible, costs money to store and pays zero interest. In an interest rate environment like our current one, when real rates are at or near record-lows, gold prices tend to be inversely related to real interest rates. This means that when rates begin to creep back up, the price of gold will likely start coming down, as investors move to higher interest paying investments. However, if the higher rates are caused by inflation, gold prices will typically increase as investors use gold as a hedge.

The Bottom Line
As with all investments, there are risks and rewards, and gold is no exception. While no one really knows when gold will peak, the consensus for now indicates that it may not be in the too-distant future. Knowing the factors that play a role in its price movement, and staying aware of the key happenings, can prepare you to make timely and informed decisions with your gold investments. (For more on gold, see Is Gold A Safe Investment?)

For the latest financial news, see Water Cooler Finance: History's Biggest Rogue Trading Scandal.

Related Articles
  1. Stock Analysis

    The Top 5 Gold Penny Stocks for 2016

    Discover five penny stock gold miners that are well-positioned to profit in 2016, providing opportunities for investors to make significant gains.
  2. Stock Analysis

    The Top 5 Small Cap Gold Stocks for 2016 (KGC, SBGL)

    Learn about the factors that led to gold's underperformance, factors that may lead a gold rally and five micro-cap gold stocks to consider.
  3. Fundamental Analysis

    Performance Review: Commodities in 2015

    Learn how commodities took a big hit in 2015 with a huge variance in performances. Discover how the major commodities performed over the year.
  4. Stock Analysis

    The Top 5 Micro-Cap Gold Stocks for 2016 (PGLC)

    Discover five micro-cap gold miners that are well-positioned for a positive year in 2016, even if gold prices remain under pressure.
  5. Stock Analysis

    6 Risks International Stocks Face in 2016

    Learn about risk factors that can influence your investment in foreign stocks and funds, and what regions are more at-risk than others.
  6. Stock Analysis

    The Top 5 Micro Cap Basic Material Stocks for 2016 (GURE,ODC)

    Learn about the factors that have dragged down basic materials sector performance over the past couple of years and where to find gains in the sector for 2016.
  7. Stock Analysis

    3 Ways GoldCorp Inc. Can Rebound from Low Gold Prices (GG)

    Learn three factors that could result in Goldcorp's stock rebounding off of lows even as gold prices remain at their lowest levels in years.
  8. Saving and Spending

    All That Glitters Does Not Belong in an IRA

    Gold can be an attractive investment given its meteoric rise. But those wanting it within their IRA must look at some of the hurdles facing the investment.
  9. Economics

    3 Economic Challenges France Faces in 2016

    Learn about the three most significant economic challenges facing France in 2016. How will France implement reforms to improve its GDP and reduce unemployment?
  10. Retirement

    3 Reasons Why This Is the Perfect Time To Visit Greece

    Discover three reasons why now is the best time to visit Greece, including the favorable exchange rate and the country's unrivaled hospitality.
  1. In what ways does Bayesian probability support the probability default model when ...

    During the European debt crisis, several countries in the Eurozone were faced with high structural deficits, a slowing economy ... Read Full Answer >>
  2. How do wholly owned subsidiaries operate in the European Union?

    Regulatory authorities in the European Union (EU) are suspicious of wholly owned subsidiaries, or at least their relationship ... Read Full Answer >>
  3. What techniques can be used for hedging exposure to the electronics sector?

    Hedging exposure to the electronics sector offers an investor a way to insulate his portfolio from losses during periods ... Read Full Answer >>
  4. What nations other than the U.S. have risk-free interest rates?

    Countries other than the United States that have risk-free interest rates are Canada, the European Union, Japan, the United ... Read Full Answer >>
  5. What techniques are most useful for hedging exposure to the banking sector?

    The banking sector moves in the same direction as the broader market, but its volatility is much lower. The sector's stability ... Read Full Answer >>
  6. Is credit a form of fiat money?

    To understand why credit is a form of fiat money, one must first understand what money is. At its most basic level, money ... Read Full Answer >>
Hot Definitions
  1. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  2. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  3. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  4. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  5. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
Trading Center