-- Q: Is gold a good thing to hold to protect against economic collapse?
A: There's no shortage of the number of doomsayers predicting the collapse of the global financial system.
Given the news, especially coming from Europe, it's hard to blame them.
And with such widespread belief that the financial system is under strain and about to buckle, the masses understandably are trying to find anything they can to preserve the value of their assets.
During times of such uncertainly, any assets that are stored on paper become the enemy. Paper money, in particular, is often the object of investors' scorn as they figure the currency won't even be worth the value of the paper it's printed on.
And for these people, the only true safe haven are tangible assets, things that have real innate value and aren't just a claim on something of value. Gold, silver and other precious commodities like jewels are often on the short list of people looking to own things with tangible value.
So far, the strategy is working very well. Just this year, shares of the SPDR Gold Trust gld have risen 20% this year. Meanwhile, the broad Standard & Poor's 500 index is up just 0.07% for the year.
But many investors will likely make the mistake that's often made. Investors assume that just because an asset has been going up that it will continue to do so. While it's true that gold would have been a nice offset to U.S. stocks this year, that doesn't mean it will continue to work out so well next year or the next decade.
There's another consideration, too. If the global economic system collapses, just owning a gold ETF probably isn't going to cut it. You can't use your shares of SPDR Gold Trust at the grocery store to buy beef jerky. Instead, if you're truly looking at gold as being your safeguard from the unlikely event of a complete economic collapse, you'll want to have physical possession of gold. I'm not suggesting this is a good idea, but if gold is your ultimate backstop, you'll want to have it in your possession.
Clearly, having physical possession of a valuable asset presents its own bevy of problems, including security. But if you want to gird for a complete meltdown and follow the directives of the most pessimistic prognosticators, you might as well do it right.
Matt Krantz is a financial markets reporter at USA TODAY and author of Investing Online for Dummies and Fundamental Analysis for Dummies. He answers a different reader question every weekday in his Ask Matt column at money.usatoday.com. To submit a question, e-mail Matt at firstname.lastname@example.org. Follow Matt on Twitter at: twitter.com/mattkrantz