Gold Regains Some Lost Ground
Gold, a traditional haven for investors in times of turbulence, is regaining some of the ground lost in the 1990s as the battle between U.S.-led forces and Islamic extremists escalates, and as the world’s leading economies tilt toward recession.
But the metal would have to rise significantly to get close to its old highs, analysts note.
Near-term gold futures prices in New York closed at $292.40 an ounce Monday, up $1.
The price has risen $20.10 an ounce, or 7.4%, since the Sept. 11 terrorist attacks. The recent peak was reached Sept. 26, when near-term futures closed at $293.30.
In turn, shares of many gold-mining companies have rallied since Sept. 11, though they, too, have pulled back over the last week or so.
Standard & Poor’s index of four major mining shares (Barrick Gold, Homestake Mining, Newmont Mining and Placer Dome) has gained 8.9% since Sept. 11. In that period, the blue-chip S&P; 500 index has fallen 2.8%.
Gold futures have risen 6.9% year to date, while the S&P; gold stock index has jumped 26.4%.
Gold fans say the retaliatory strikes launched Sunday by U.S. and British forces enhance gold’s chances of reversing at least part of its net 32% drop during the ‘90s--when investors shunned bullion for rising equity markets and central banks sold gold reserves to buy bonds instead.
“For the first time in a long time you can put down reasons why the gold shares and the gold price should move up,” said Armin Diem, head of southern African asset management for Appleton Group in Cape Town, South Africa.
Among 23 commodities monitored by Bloomberg News, only cocoa, pork bellies and lean hogs have outperformed gold this year.
“Gold is becoming one of the options again,” said Johan van der Merwe, global head of resources at Investec Asset Management. “It’s definitely up there as one of the face savers.”
Gold’s popularity, historically, was based on its reputation as a store of value that held fast in good economic times and in bad.
But that reputation was sullied as investors found better uses for their money in the 1990s, and gold endured a long slide.
The metal still is a far cry from its old levels. The price was above $400 an ounce as recently as January 1996. In 1980, the price briefly topped $800. Gold prices tested a 20-year low of about $255 an ounce as recently as April.
If the conflict unleashed in Afghanistan proves short-lived or the world economy recovers more quickly than expected in 2002, investors may lose interest again, Diem said.
Some analysts have long argued that investors who want safety are more likely to buy U.S. government securities or other interest-bearing securities rather than hold gold.
