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Why has gold turned into such a popular investment all of a sudden? Thanks, D.M.

Gregg Greenberg

: Like Dorothy on her way to Oz, investors have closely been following the yellow brick road of late. Even after its recent price drop from more than $700 an ounce in early May to its recent levels near $585, gold is still up more than 30% since last year, and some experts think the precious metal could still move much higher.

How much higher? Well, even the wizard himself would have a difficult time answering that question precisely. One place he may tell you to look for clues, however, is at the declining dollar.

Traditionally, the demise of the dollar is what sends investors scurrying for an asset class that will retain its value even in the face of rampant inflation. During the late 1970s and early 1980s, for example, rising oil prices sparked double-digit inflation in the U.S. The result was a flight to gold that ultimately pushed the price to a record high of $875 an ounce in January 1980.

Over the course of the 1980s and 1990s, however,

gold prices

were stuck in a rut as the

Fed

stamped out inflation. But gold started to pick up steam in 2002 as the dollar started its long fall against the yen and the euro, mostly because of worries that the U.S. deficit was growing out of hand.

The greenback rebounded in 2005, yet has resumed its downward slide so far in 2006 as the government continues to borrow -- and print -- money to pay for things like Hurricane Katrina relief and the Iraq war. Gold has not exactly traced the path of the dollar this year because widespread speculation has created a more volatile environment, but the links between the dollar, inflation and the shiny metal still apply.

And while gold may not pay a dividend or have as many industrial uses as other metals like copper and steel, any central banker will admit that gold does have historical relevance as the currency of last resort. And in these uncertain times, any troubling geopolitical event -- say a terrorist attack or oil embargo -- also will boost gold's appeal.

What is the difference between "lifestyle" and "targeted maturity" funds? Best Regards, R.H.

Targeted maturity funds are basically a kissing cousin of "lifestyle" funds. With a lifestyle fund, an investor selects a fund of funds based on how much risk -- aggressive, moderate or conservative -- they wish to take at that specific point in their life.

Younger investors may opt for an aggressive fund composed of, say, 80% stocks and 20% bonds, because they have more time until retirement. When they grow older and approach retirement, however, they may decide to reverse those percentages by switching to a conservative lifestyle fund. It's worth noting that not all fund families offer the same asset allocation.

A targeted maturity, or target date, fund is typically for people who expect to retire in or near a specific "target" year. That target year is typically part of the fund's name, so the

(VTTVX) - Get Report

Vanguard Target Retirement 2025 fund, for example, is obviously designed for people who plan to retire in or near 2025.

Like a lifestyle fund, a targeted maturity fund typically invests in several other mutual funds offered by same fund family. As the target year approaches, a targeted maturity fund typically adjusts its allocation in the underlying funds, gradually becoming more "conservative" by decreasing its stock fund holdings in favor of bonds.