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Should You Jump on the Gold Bandwagon?

Cameron Huddleston

Investors are flocking to the precious metal as the dollar drops.

Gold is on a winning streak. The precious metal is heading for its tenth consecutive year of gains after hitting a new high of $1,299.70 an ounce September 24.

People tend to flock to gold when they lose confidence in the dollar. But does that mean it's a good investment now? Well, it depends on how you invest in it.

Buying gold directly can be a pain because you need insurance and secure storage for your coins or bullion. Plus, even though gold seems like a safe bet, its price is about twice as volatile as the Standard & Poor's 500-stock index. If you want to own something that simply tracks the price of gold, your best bet is an exchange-traded fund such as SPDR Gold Shares (symbol GLD). If you have an even stronger stomach, invest in a gold mutual fund, such as Tocqueville Gold (symbol TGLDX), which invests in mining shares. Gold stocks are even more volatile than the price of gold.

Certificates of deposit tied to the price of gold might seem like a good buy, but they're complex investments that don't always pan out. See These CDs Are Fool's Gold for more information.

To learn more about investing in gold, take our quiz: Are You Gold's Fool?

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