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Why is the price of gold so high?
Gold and silver
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TEXT OF STORY
Kai Ryssdal: Gold hit a $1,000 an ounce today. The first time that's happened since February. Back then investors were worried Citigroup was about to go under. That's not much on investors' minds anymore. But still, prices have been marching higher. Marketplace's Alisa Roth looked into why investors are going for gold right now.
ALISA ROTH: Talk to analysts about why a lot of investors are buying gold, and there's only one thing they seem to agree on. Gold bugs are nervous. About everything.
Jeffrey Christian follows gold for the CPM Group. A commodities research and consulting company. He says gold-buyers are worried about the dollar being weak.
But that's just the beginning.
JEFFREY CHRISTIAN: Weakness not only in the dollar but in other currency markets, they're concerned about inflation, they're worried about the stock market falling. They see very low interest rates on interest-bearing assets. There's concern about the political, economic and financial stability of various systems both in the United States and worldwide.
Other people who follow the market give other reasons for the gold rush: the weak dollar makes it cheaper for foreigners to buy gold, demand from investors in developing countries, oil prices.
And right now, there's another factor, too: seasonal demand. John Licata's research firm, Blue Phoenix, focuses on metals and energy. He says in September people in India start buying lots of gold, for one reason...
JOHN LICATA: The beginning of Indian wedding season, which is historically a very important driver for the price of gold from late September to December.
The price of gold has been going up for much of the year. And most people seem to agree that it'll stay high at least into the beginning of next.
Jeffrey Christian, the analyst, put it this way...
CHRISTIAN: When the world becomes a more stable place economically, financially, politically, then you would expect people to back off from gold.
In other words, gold could be expensive for a long time.
In New York, I'm Alisa Roth for Marketplace.
The reality is that the "man or woman in the street" has yet to start acquiring gold (or silver). Most have never seen a gold bullion coin (maybe 1 in 100), and gold stocks have an unsavory reputation among the public from an historical perspective. No, the public has not yet participated in whatever is to happen with the price of gold.
There is nothing solid about currency. If we were to take a snap shot of all the things that people have spent their money on previously, it would be rare to find a commonality amoung individual investments or things that the common person buys to stablize their personal equity. Buying gold is now that safe investment and solid foundation. The dollar has little basis due to the government spending, equities are 46% above their low in March and many people are upside down on their real estate. The only investment today that can be purchased, held in your hand, sold to your neighbor or bartered for other goods without questioning its true value is gold and silver. The common 'Joe' looks at precious metals as a limited commodity. Supply and demand, there is only one way it can go and that is up.
