I don't know about you, but when I think of insurance I want to stop before I even start; it's kind of a depressing topic.

Pick your category— casualty, health, home, life, pet, vehicle. Aside from the routine checkup, using insurance usually means something bad happened. Owning gold as a form of protection for paper money is a similar story...like insurance, pray you never have to use it.

Rule #1
Spread your purchases out over a lifetime, whenever you stop buying car insurance, stop buying gold. As a rule of thumb, keep the weighting/allocation of gold pegged to at least 5% of your overall net worth (it can be more but not less).

Coins and bars can be purchased from local dealers or directly from the US Mint. Junk silver coins (pre -964) are the next best option if you like the idea of touching your investment but can't locate or afford Au.

Rule #2
Don't buy "collector" coins, unless you want to start a new hobby.

For purposes of insuring/protecting your paper money, the goal is to pay as close to the spot price as possible. Dealers charge premiums of 3-5% above spot, Coinflation.com posts daily updates of melt value. When you plan ahead, there is no need to overpay.

SPDR Gold Trust (GLD -0.25%) represents the value of 1/10 of an ounce; it's the most actively traded gold ETF. Placing full faith and confidence in their custodian HSBC Bank, investors have claim to 28.9 million ounces, or $38 billion worth of gold in a London vault.

Collecting the gold would be frowned upon in this establishment! Unless your name is JPMorgan Chase, don't expect to convert your GLD into the real thing. For that reason and expenses, GLD always trades at a discount to the true 1/10 of an ounce value.

If you are partial to Canadians, or just a little nervous about securing your gold, Sprott Physical Gold Trust (PHYS -0.28%) is another viable option. Gold is stored at the Royal Canadian Mint, and I think monthly dusting and shining of the bars is included in Sprott's 0.42% management fee.

With this product, most investors can qualify for long-term capital gains rates, versus the maximum of 28% applied against most precious metals ETFs and physical gold coins.

The downside: PHYS is less liquid than GLD, but unless you're moving millions there's plenty of room to splash around. I haven't put them to the test on their promise (show me the gold!), but if you want to find more information you can go here.

Gold stocks
Gold miners offer greater leverage to the price of gold. Lately, precious metal producers have had their stock prices crushed to sizes that could fit through a quarter inch mesh screen. As a whole, the industry is basically priced for the worst case scenario. Most miners need at least $1,300 per ounce to recoup their costs of production.

Market Vectors Gold Miners ETF (GDX 1.60%) can be used to cast a broad net around the world's premium gold stocks. If they survive, gold miners should outperform over the next 12-18 months, having sold off more than 60% from the highs of 2011.

The fund has roughly $7.2 billion in assets— the top five holdings are Goldcorp, Barrick, Newmont, Silver Wheaton and Eldorado. Unless you plan to get your hands dirty and dig through the nuances of the mining business, buying GDX would be a better alternative.

If diversification is a good strategy...
...then physical gold/silver and precious metal producers should comprise at least 5% of one's overall net worth.

Please remember, in owning gold the goal is not to make windfall profits. The purpose is to help protect savings in the event of accelerating US dollar depreciation, political turmoil, or economic downturn.

Gold and precious metal miners will typically correlate negatively to most other asset classes. This insurance-like piece of the investment portfolio will tend to perform well when everything else is doing poorly and vice versa.