Gold has had its ups and downs recently, hitting an all-time high in mid-June and hitting a two-month low just four weeks later. And while many investors flock to this commodity when the market's in trouble, gold might not be a good fit for your portfolio. If you're thinking about investing in gold, consider this: Don't overdo it. Gold can provide diversification, but investors should be aware of the risks of investing in commodities. "Gold is really a precautionary hedge and not something your whole portfolio should be in," says Paul Zemsky, head of asset allocation for ING Investment Management. He recommends that investors only have 3 percent to 5 percent of their overall portfolio in gold. Gold can be extremely volatile. The ups and downs of the past few weeks leads John Diehl, senior vice president in the retirement division at The Hartford, to suggest finding a fund that invests in a broad basket of commodities and not just in gold alone. Two popular choices are Pimco Commodity Real Return Strategy Fund (PCRAX) and PowerShares DB Commodity Index Tracking Fund (DBC). Gold has value. The dollar is still the world's primary reserve currency — the most commonly held currency by central banks around the world. But when fear strikes the market, many investors flock to the safety of gold. "It's the only thing that holds its value even if central bankers and governments are eroding the value of their own currency," says Zemsky. When there are global concerns about monetary policy, he says, gold will benefit from a flight to quality. Register with Chicago Tribune and receive free newsletters and alerts >> Investing is easier than ever. Exchange-traded funds have revolutionized investors' access to commodities. "In the past, for investors to buy gold, they either have to buy the coins or the bullion, and now in the form of ETFs there's a whole variety of options," says Tom Lydon, editor of ETFTrends.com. In addition to buying gold through futures contracts, investing in physical gold — bars in underground vaults — through ETFs is now possible. Distributed by Tribune Media Services. Other precious metals in gold's shadow Platinum and palladium Even as gold prices surged, platinum and palladium have struggled to find their footing. That's because more so than gold, these two "white metals" have a number of industrial applications. Platinum and palladium are particularly common in the automotive industry, where they are used to make catalytic converters. In other words, when the stock market dips — particularly when the fall affects consumers' demand for cars — platinum and palladium will often lose out. In relation to gold: Despite these differences, platinum, palladium and gold will often move in the same direction by virtue of all being precious metals. All three, for instance, have seen sharp gains since late 2008. Still, experts say the fact that the white metals can diverge from gold during periods like those the market experienced in May is a reason for gold investors to diversify into platinum and palladium, and vice versa. Silver Like the other precious metals, silver has had a rather impressive streak this year to date. In terms of its place in a portfolio, silver falls somewhere between gold, platinum and palladium. "If we see the continuous (deterioration) in the debt situation in Europe — not just with Greece, but if we see that in the other regions — I think that bodes well for gold," says Fred Jheon, ETF Securities' head of product development for the United States. "If we do see some of that easing off and a recovery of the economic cycle, then I think that bodes well for platinum and palladium. ... And silver is probably in between the two." In relation to gold: When silver and gold diverge, the difference often signals investors' views toward the economy. "When they think the economy is going to do well, they'll buy silver and sell gold," says Tom Pawlicki, a commodities analyst with MF Global. "When they think the economy will do poorly or there's a need for a safe haven, they'll buy gold and sell silver." That's because gold is still investors' favorite among the precious metals when it comes to hedging against crises.

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