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How Cramer Is Playing Gold

At these levels, should you buy any more gold?

That seems to be a driving question on Wall Street.

Gold finished down more than 1.6 percent at $1,609.50 on Friday, extending a week-long down trend when several bearish factors, including a rising dollar, pushed gold briefly below $1,600.

(Read more: Gold Ends at Six-Month Low After Scare Below $1,600)

However, Cramer feels that every investor should own some gold.

He thinks the precious metal is an important hedge. That is, catalysts that typically send the stock market tumbling send gold higher.

"Think of it as insurance against economic and geopolitical chaos as well as inflation," said Cramer.

"You wouldn't own a home without homeowners insurance, you wouldn't own a car without car insurance, and you shouldn't invest without some gold exposure because gold pays off when everything else fails."

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Also Cramer likes gold, because he believes it's becoming a kind of de facto currency. "With governments debasing their currencies left and right to be competitive investors need to go somewhere, and they've been turning to gold," he said.

So how should you own gold?

"The easiest and least risky way is through an ETF called SPDR Gold Shares, but mostly known by its symbol GLD, which owns the metal and does a terrific job of tracking its price," said Cramer.

Although he didn't say it on Friday's show, Cramer often says the best time to establish a position is on a pullback. And gold is currently sliding lower.

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What about the gold miners?

"If you pick the right company, one with low costs that's growing production, then it can outperform the commodity for a period of time," said Cramer. But you're also buying risk associated with the company - such as mismanagement, increased costs or too much debt.

"Virtually every single time I've gotten behind a gold stock in recent years, I've been burned. So I finally just gave up on the entire group and decided to simply stick with the GLD," he said.

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