Gold is not dead.

Ask Germany.

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

When the gold transfer is complete, Germany will have withdrawn all the gold it was storing in Paris, leaving only 13% of its reserves in London and about a third of its reserves in New York.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 has 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 approximately $20 trillion in debt.

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

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

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 quick trading for good profits. I don’t care if the market is bullish, bearish, or, I shudder to think of it, range bound. There is always a way to profit if you know where to look.

But gold is a tricky 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 in 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 just convert it to cash and tuck it under their mattresses.

And going by the way that 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 keeping pace with the stock market, as the S&P 500 gained 9.5%.

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

And with 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 a market rally, they are happy to ditch gold for high-flying stocks that promise much better performance.

For example, during the dot-com bubble, the S&P 500 rallied from January 1995 to September 2000 by more than 200%. By contrast, gold wobbled 27% over 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 in the doldrums until it can learn to play nice with the other assets.

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

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

The financial market has its fair share of potential hurdles that could bring the whole thing crashing down. Let’s see a quick list:

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

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

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

• The nightmare of derivatives. The United States is facing a collapse that could rival the fallout from the housing debacle, as the top five US banks have loaded up on interest-rate-linked derivatives.

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

Investors are watching these issues closely, hoping that 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 is 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 it all comes crashing down.

Gold remains the perfect hedge: your insurance against the Federal Reserve, Washington, reckless banks, Europe, and even that black swan that hasn’t made it onto our radar yet. That’s why gold continues to shine as the favorite even during stock market highs this year: investors know they need a safe haven, just in case.

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

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