GOLD -- THE PILLAR OF SECURITY Gold is a traditional means of inflation protection. Some investors have been disappointed with the performance of gold in the past decade, but they are forgetting the primary purpose of gold as an inflation hedge. There has been very little inflation in the American economy in the past decade -- so there has been nothing to be protected from. This does not mean that gold has been a bad investment. The proper comparison is not to other investment performance, but to buying life insurance and not dying. The gold did exactly what it was supposed to do in the investor's portfolio -- provided a store of value with inflation protection. An investor who is paying attention to the current price of gold is completely missing the point. Speculators have often lost badly with gold, but that is true of any speculation, and is not because of some inherent characteristic of gold. This speculation is very different from the proper use of gold in an investment portfolio, as a way of achieving balance, diversification, and inflation insurance. To put an entire savings program into diversified paper investments, without a gold diversification, is not a truly balanced plan. The security of the Swiss franc is one step in that diversification, because of its strong gold backing, and its traditional strength as a currency. But only a step. The next step is to also diversify some of the portfolio into a pure gold investment. Every paper currency buys less than it did at the turn of the century, but gold buys almost two times more. That is true inflation insurance, and has nothing to do with overnight speculations on a belief in short term price trends. There is nothing wrong with speculation, but it should not be confused with balancing the portfolio. In fact, a small percentage of any diversified portfolio is devoted to speculation. As we have seen in the history of money section, paper money inevitably declines in value and purchasing power. In an era when most governments have legally freed themselves from any requirement to act responsibly or tie their paper to real assets, This makes it particularly important for the investor to create his own "reserve fund" since the government's paper money no longer is required to have one. For thousands of years, gold has been man's premier store of value, more trusted worldwide by individuals than any paper investment or paper currency. Gold cannot be inflated by printing more of it. It cannot be devalued by government decree. And, unlike paper currency or many other kinds of investments (such as stocks and bonds), gold is an asset which does not depend upon anybody's promise to repay. Although gold has been mined for more than 6,000 years, only about 110,000 metric tons have ever been produced. If you could bring it all together, that is just enough to make a cube measuring only 18 meters (approximately 55 feet) along each side. Gold is one of the scarcest, and so most sought-after, metals on earth. Gold cannot be fabricated by man. Nature limits its supply. the amount of new gold mined each year totals less than 2,000 metric tons -- an amount that could be fitted comfortably into the living room of a small modern house. Throughout recorded history, gold has held its value against inflation. Experts say, for example, that the same quantity of gold is needed to buy a loaf of bread today as in sixteenth century England. This is why so many investors world-wide see it as the "ultimate asset" -- an important and secure part of their investment portfolios. Gold has an international value that tends to respond to the changes in value of national currencies. Time and again, gold has proved a successful hedge against the devaluation of an investor's national currency. Gold is one of the few investments that has survived -- and even thrived -- during times of economic uncertainty. Gold is man's classic hedge against almost any monetary crisis, moving independently of paper investments. For example, in the slump following the "Wall Street Crash", from September 1929 to April 1932, the Dow Jones Industrial Index slid from 382 to 56 -- a drop in value of 85% -- and some 4,000 U.S. banks closed their doors. Meanwhile,the price of gold actually went up. Gold also increased in value during the events following "Black Monday", October 19, 1987, when the Morgan Stanley index of world shares fell 19% over 10 days. And during the mini-crashes which have afflicted the stock markets since then, gold has held its value and ignored the travails of share investment. Gold is essentially a long term investment with daily movements in price and there is no tactic to ensure that you make your purchase at the best possible time. One of the best ways to build up a keenly priced gold portfolio is to purchase relatively small amounts, on a regular basis, over an extended period. This is called "cost averaging". This will ensure that your total investment will have been acquired at the average gold price during the period of your investment program.