Gold is the highest flying precious metal in the markets now. Everybody wants to have a piece of this lustrous metal. If you have missed out in all of this action what can you do now?

The short answer is to wait for Gold to pull back. Remember the axiom: Buy Into Weakness and Sell Into Strength.

But there is more to investing in Gold, we think. You will need to understand the rationale first for buying Gold. Why do people buy Gold? In India and China for example, Gold has ornamental value beyond comparison. In the US and other Western nations this is not always the case. Here in the US, Gold is almost always considered a hedge for periods of uncertainty and inflation.

Obviously, global economies are going through a period of uncertainty. EU Zone economies are looking at a financial mess and any missteps here have the potential to cause a "contagion" like effect across the global financial system. In these circumstances, Gold has become the perfect hedge. Gold prices are now supported by uncertainty in global financial conditions especially in the Europe and the risk introduced to the US Dollar because of the huge deficit. Until a clear resolution emerges, Gold will remain attractive. But, we are unable to project a future price for the metal though some investors are talking about $2000 to $2500.

To determine if your portfolio must have Gold, you as an independent investor will need to think carefully about the outlook for the global economy in the next few years. If your assessment indicates that all hell will break loose and the various currencies of the world will become non-existent then you need loads of Gold.

We think it will be absolutely irrational to convert your entire portfolio to Gold unless you are absolutely certain of the kind of outcome to the global economy. This kind of action introduces an unnecessary risk to the portfolio.

Also remember that there is not enough Gold in this world mined for everyone to possess abundant quantities of the metal.

Having ruled out the extreme rationale of accumulating Gold as unreasonable and unfeasible, we can safely say that a a portion of portfolio can be allocated for Gold. The question is how much or what percentage.

Financial Advisors usually recommend allocating about 10% of a portfolio to alternate asset classes. These include Real Estate, Commodities etc. The advantages with other asset classes such as Real Estate is the potential for that class to generate income along side a capital gain. With Gold that's a significant disadvantage.

This brings us to the conclusion that Gold for investment purposes has to be considered as a hedge and accumulated gradually at lower prices in a diversified portfolio that allots about 10% to alternate asset classes.