All the other asset classes were beaten fair and square by Gold in the year 2008, and it was the second consecutive year. A $1,000 investment in gold on the New YearÕs Eve last year has become worth $1,427 this year, according to a research. A reality check will serve us better here though, in dollar terms, the value of gold rose only by 3% in the year. Now that youÕve got both sides of the story, letÕs switch back to the long term picture, and gold story looks promising yet again.

Many influential investors discount gold as investment because they see little utility for the precious metal apart from being used as jewelry. All their arguments come to a naught when you look at the actual performance of the yellow metal amidst all the economic turmoil.

In 2008, the real estate sector and stock markets crashed everywhere, whereas gold posted a gain of about 5% on per ounce basis. People flocked to dollar, or else gold gains would have been even better. The gold critics say it should have done better due to the state of global economy, whereas its supporters say worst of the economy is still to come and that best gold peaks are ahead.

Nobody knows what the future holds for us, but buying gold appears to be one of the sure-fire ways of hedging against the global financial chaos. Right now, it is the only asset class that appears to have the promise to hold up at the end of 2009.

There are two likely fall outs of trillions of dollars being injected into the economy by the government Ð inflation and weakening of dollar. In both the cases, gold will emerge a winner because it acts as a hedge against inflation.

If you are convinced there is a strong enough case in favor of gold, youÕd definitely like to know how to invest in gold. There is a wide variety of methods to choose from.

Pure gold, cast as coins or bars from one gram to one kilogram, instills a sense of control in you in these trying economic times. The same, however, makes you vulnerable to theft thus increasing the cost of keeping your wealth safe.

Traded like shares, each share represents a fraction of an ounce of gold. The shares are backed by physical gold kept in London, New York and Zurich. ETF is a convenient and cost effective way of owning gold, since you are saving on insurance and costs related to storing the metal. The government, however, taxes the long term capital gains on gold at double the rate of stocks, a fact often ignored by the ETF traders.

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