Gold is not dead.

Ask Germany.

Germany’s Bundesbank recently announced it had completed the transfer of $13 billion in gold bullion that had been stored in vaults under Lower Manhattan, bringing the metal home. The country had started repatriating its gold in 2013 with the aim of storing 50% of its reserves in Frankfurt again.

When the gold transfer is complete, Germany will have withdrawn all the gold it was storing in Paris, leaving only 13% of its reserves in London and about a third of its reserves in New York.

With the rise of cryptocurrencies, like bitcoin, and digital cash, like PayPal, Apple Pay, and other apps, there’s been a steady drop in the use of physical cash, making the yellow metal feel downright archaic.

But gold has a special status, stronger than even the pair of twenties in your wallet right now. The precious metal offers a cloak of security and protection. It is considered more reliable than any government issued currency.

Just look at the euro, a currency for a union of countries that threatens to tear itself apart. (Germany certainly feels better having its golden home back.)

Or even the US dollar, a currency backed by roughly $20 trillion in debt.

Gold is not only alive and well, it should play an important role in your portfolio…

Let me start with this: I am not a gold lover.

I am a trader first and foremost, and usually with a short time frame as my goal. I was raised on the versatility of options and fast trading for good profits. I don’t care if the market is bullish, bearish or, I shudder at the thought, range bound. There is always a way to profit if you know where to look.

But gold is a complicated thing.

It does not pay dividends, so there is an opportunity cost associated with the metal.

However, when there is market uncertainty, shaky economic growth, or geopolitical discord, gold shines like a safe haven from the storm. When stocks are taking a beating, investors will look to gold as a safe way to store some of their dollars rather than simply turning it into cash and stashing it under their mattresses.

And going by the way gold has been trading, it seems that many investors are not too sure about this market rally.

The hedge

In 2016, the price of gold rose more than 8%, almost in step with the stock market, as the S&P 500 gained 9.5%.

In fact, the World Gold Council reported that gold demand rose 2% in 2016 to 4,309 tonnes, marking a new three-year high.

And less than two months into the new year, gold is up another 8%, outpacing the S&P’s gain of about 5%, which is remarkable.

When stocks are strong and investors believe in the market rally, they are happy to ditch gold for high-flying stocks that promise a much better return.

For example, during the dotcom bubble, the S&P 500 rallied from January 1995 to September 2000 by more than 200%. By contrast, gold tumbled 27% during that same time period.

Or look at the market rally from October 2012 to January 2016, when the S&P 500 gained 37% while the yellow metal fell 35%.

In short, when times are good, gold is the forgotten child that is left to time out until it can learn to play nice with the other assets.

And when times are bad, gold is the lavish offering security and protection.

So if the stock market is trading at all-time highs and regularly setting new records, why does gold continue to shine as the favourite?

The financial market has its fair share of potential hurdles that could bring everything crashing down. Let’s look at a quick list:

• Stocks are overvalued. We recently explained that, by traditional measures, stocks are painfully overvalued and we’re bracing for mean reversion.

• Washington in crisis. Our new president has promised a series of extreme measures that could have significant repercussions for both the US market and the global market that could start with a sharp slowdown in earnings.

• The next outlet in Europe. The EU and the UK are stumbling through Brexit and the next major elections: Italy, Germany, the Netherlands and France. Furthermore, Europe’s growth has been largely overlooked by many investors and could become the next hot deal as they tire of the drama in the US.

• The nightmare of derivatives. The United States faces a collapse that could rival the fallout from the housing meltdown, as the top five US banks have loaded up on derivatives linked to interest rates.

• The Fed’s wild card. The latest Federal Open Market Committee meeting transcripts revealed that the Fed is looking to raise interest rates “fairly soon.” Higher interest rates will suck money out of the economy as it costs more to pay off our growing debt. Higher interest rates also tend to crush stock market rallies.

Investors are watching these problems closely, hoping one or more of them will throw stocks off their current course.

Your disaster insurance

Of course, this does not mean that the market is going to fall off a cliff tomorrow.

I think the one quote every speculator gets hit over the head with is: “The market can stay irrational longer than you can stay solvent.”

In short, just because a stock or index has risen to all-time highs doesn’t mean it can’t continue to rise, even if it doesn’t make logical sense to you and me.

But it doesn’t hurt to have a hedge to protect yourself when everything comes crashing down.

Gold remains the perfect hedge: your insurance against the Federal Reserve, Washington, reckless banks, Europe, and even that black swan that has yet to hit our radar. That’s why gold continues to shine as the favorite even during this year’s stock market highs: investors know they need a safe haven, just in case.

Physical gold is your best option instead of investing in “paper gold” like exchange-traded funds.

No matter how you choose to add physical gold to your portfolio, the important thing is that it is there, ready to be your safe haven when everything falls apart.