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Think long term with gold

NEW YORK - An ounce of gold passed $880 for the first time Tuesday. Here are some questions and answers about what the metal's record high means for individual investors.

Should I invest in gold?

Putting money in precious metals such as gold can be a smart way to diversify your portfolio, particularly as a hedge against inflation. Over the long term, gold - one of the world's oldest forms of currency - is likely to hold its value.

In the short-term, however, gold can be very volatile. Gold prices traded in a range of almost $250 last year, and that's expected to rise by $75 to $100 in 2008, according to Jon Nadler, senior analyst at Kitco Bullion Dealers.

How can I invest in gold?

You have a few options. Individuals can put money in an investment vehicle tied to gold or buy the physical metal, in the form of those gleaming yellow bars and coins.

One choice often recommended for individual investors is a gold futures ETF, which essentially tracks what traders expect the price of gold to be at a later date. Another is a gold bullion ETF, which tracks the price of physical gold in the commodities market.

A prudent choice for inexperienced investors is to buy into a mutual fund that has some exposure to gold. That way, you benefit from any jumps in gold prices but don't go belly up if the market takes a dive.

You could also consider buying physical gold, which is the most direct way to take advantage of rising values. That involves contacting a bullion dealer who will ship to you gold bars or American Eagle coins produced by the U.S. Mint. But your gold will need a home.

Costs to store and insure your gold, however, can eat into any profits you make on its rise in value, and you won't earn any interest on it.

[Last modified January 9, 2008, 00:02:02]