To many investors, gold is all that glitters
For years, the biggest fans of gold weren’t taken very seriously. Now they’re looking downright prophetic.
After rising for three straight weeks, gold futures are hovering near the record of $1,217.40 an ounce set Dec. 3. If you invested $10,000 in gold two years ago, it would be worth nearly $14,000 today — for a return of just under 40%.
While fans of the shiny metal have sometimes been dismissed as “gold bugs,” the fact is that gold has been rising in value every year since 2001, when an ounce of gold was selling for $279. A $10,000 gold investment then would be worth more than $30,000 today.
That’s why the precious metal is beckoning Katherine Gorell, 34, a communications coordinator in Miami.
Her stock portfolio has shrunk nearly 5% since 2008, and she lost about $1,000 in Thursday’s market turmoil alone.
“You just can’t predict the market, and I’m not so sure we’re going to have a recovery,” she said. “The economy is global and there are so many weak links — anything could happen at any time. Gold is one of those things that people have always thought was safe.”
She’s held off though, partly because the price is now so high.
“And if I don’t physically have the gold, I don’t know if that’s any safer than having a mutual fund,” she said. “But I’m worried that if I keep mulling and don’t act, I’m going to keep losing value” in the stock portfolio.
Some analysts are even anticipating that gold will hit $1,400 in the near future — a far cry from two years ago when $1,000 for an ounce was considered as realistic as finding the lost city of El Dorado.
“We’re going to see some explosive movement in gold,” said John March, chief technical officer for gold trading firm Superior Gold Group in Santa Monica. “We’re looking at something that doesn’t have a lot pushing it down but a lot pushing it up.”
Over the next eight years, March expects to see an average annual boost of 20% to 25% in the price of gold.
Investors are ducking into the precious metal amid concerns about volatile stock and bond markets and the worldwide implications of Greece’s financial problems.
And this time, the growth is happening despite a strengthening dollar, which usually suppresses the metal’s price.
On Friday, gold settled at $1,210.40, up 1.1% from Thursday. At one point, the price was hovering just $2.50 below December’s high.
Gold’s recent ascent has been unusual. It’s one of the few commodities that is rising while others such as platinum, palladium and silver have been sliding with the improvement in the dollar.
Oil has also been slipping. Light, sweet crude futures for June fell $2 on the New York Mercantile Exchange to $75.11 a barrel Friday, a 13% drop from Monday’s $86.19.
But silver — sometimes known as “poor man’s gold” — shot up 5.3% to $18.45 an ounce Friday as investors who couldn’t afford gold bought the cheaper metal.
Many investors are losing faith in paper-based currencies such as the euro and the pound, whose value has been falling.
In Europe, banks are running out of gold to sell while the South African government rushes to ship more Krugerrand coins, analysts said.
“You have a world financial system in crisis, and it’s quite scary,” said Ken Edwards, vice president of Inglewood bullion dealer California Numismatic Investment. “It’s causing people to look again at where their assets are sitting and they’re heading to safety. The picture of safety is gold.”
Matt Zeman, a metals trader with LaSalle Futures Group in Chicago, is worried about the possibility of a run on banks in some European Union countries. Then, “the whole thing could really unravel, and quickly,” he said.
“This thing could really be off to the races,” he said. “People just want to wrap their arms around some tangible, hard assets.”
Eventually, the dollar will sink in value, said March of Superior Gold Group. But gold will continue to accelerate, and silver will ride the momentum, he said. “I don’t see this bull trend changing for the foreseeable future.”
