Gold is one of the most enticing investments in the world right now. The price of the yellow metal hit a record high this month, and each short-term pullback has been followed by a new advance. The upward trend in gold will be marked today by its seventh consecutive quarterly gain. At noontime today, the price of gold reached $1,243.70 an ounce, not far from the record high of $1,260 it hit on June 18. At the close of trading today, gold likely will have risen 12% in dollar terms for the second quarter of 2010 alone.

Seasoned investors know that gold gains luster during times when the overall market is tanking and investors are seeking safety from economic and stock market turmoil. If you have read the financial pages of the newspapers or listened to radio and television reports about the economy and the markets lately, you can understand why investors are buying gold.

Unquestionably, investor interest in stocks has been waning as the markets retreat. The Dow began the year above 10,500 but this week fell below 10,000, amid rising economic pessimism among investors. The euro keeps hitting new lows against the dollar, as the European debt crisis worsens. Concerns are mounting about a double-dip recession, as U.S. unemployment hovers around 10%, job growth appears weak and foreclosures are at an all-time high. We also are bombarded by images of the never-ending British Petroleum oil spill disaster in the Gulf, coupled with the belated and unimpressive efforts of President Obama in addressing the situation.

This bleak outlook has many investors looking for protection. And, gold is proving irresistible for many of them. As you can see by the chart below, gold spot prices have risen during the past month, reflecting investors’ fear and flight to the precious metal.

So, why do investors buy gold during unstable times? First, although the Federal Open Market Committee announced June 23 that inflation likely will be “subdued” for some time, inflation is a long-term concern and gold offers a hedge against such risk. Second, gold serves as an accepted form of currency, which is a good thing in such uncertain social and economic environments. And third, precious metals such as gold offer a way to diversify your portfolio outside of the traditional investments of stocks and bonds.

One way to access this surge in gold prices is through exchange-traded funds (ETFs) such as the SPDR Gold Shares (GLD). GLD invests 100% in gold bullion, so it’s a pure play on the yellow metal. Of course, there are other ways to invest in gold but GLD is one of the simplest. It is as easy as a click of your computer mouse to buy and sell the fund online, without needing to physically trade the precious metal and store it in a secure place.

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