Jim Cramer: Owning Gold Is an Insurance Policy
Monday, 05 Jan 2015 06:00 AM
By Dan Weil
Gold has taken it on the chin since March, as accelerating U.S. economic growth and speculation about when the Federal Reserve will start boosting interest rates have sent the precious metal down.
After climbing 14.6 percent from the beginning of the year through March 14 amid concern about U.S. growth and geopolitical turmoil, gold dropped 14 percent, leaving it down 1.9 percent for the year. The metal traded at $1,191.70 an ounce Friday.
But that doesn't mean you should give up on gold, says CNBC commentator Jim Cramer. Gold is useful for diversifying your portfolio, he said on his "Mad Money" show.
Gold provides protection against inflation, geopolitical turmoil and other uncertainties, he explains.
And how much can you handle? "I think that 10 percent is the upper limit, because I consider gold as an insurance policy, and no worthwhile insurance policy should be 20 percent of the money you have invested," Cramer said.
"Remember you wouldn't own a home without homeowner's insurance, you wouldn't own a car without car insurance."
He suggests purchasing gold through an exchange-traded fund such as SPDR Gold Shares.
"Owning gold is not about the upside, though it can be considerable. It's just about minimizing your risk to the down side."
Concerns about Europe's economic and financial woes, particularly in light of Greece's elections early this year, might increase gold's appeal as a safe-haven investment, Adrian Day, president of Adrian Day Asset Management, told Bloomberg.
"A growing crisis in Greece and weakness in global equities will likely continue, and that will boost gold," he said. "Greece will dominate the dollar as a driver of gold."
The dollar's strength — it hit a seven-year high against the yen and a two-year high against the euro in December — has weighed on gold in recent weeks.
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Poster Comment:
Wish I had the bucks to buy some.