5
What's so special about gold?
A 1kg gold bar is displayed at a Tokyo jewelry shop.
To view this content, Javascript must be enabled and Adobe Flash Player must be installed.
TEXT OF STORY
Kai Ryssdal: Gold hit another high today -- it topped $1,340 an ounce in New York. We should note that is not the inflation adjusted high; that would be $2,300 an ounce. The basic truth still applies here. When investors are uncertain, they turn to gold. And investors are uncertain. With so few profitable places to park one's cash these days, gold is looking like a good way to get a decent return on your money. But otherwise what's the draw? It's not like you can take it down to the corner bakery and buy a loaf of bread, right?
Janet Babin has more.
Janet Babin: Those gold earrings won't buy a loaf of rye bread just yet. But there have been times when gold was the only thing that would get you that rye.
Anton Schutz: My mom grew up during WWII in Germany, and whatever assets they had, after the bombings, that's how they got bread.
That's Anton Schutz, a portfolio manager with Burnham Financial Services. He says this latest bullion frenzy's being fueled by global uncertainty and fears of inflation. But he says there's another reason: More people are selling gold.
Schutz: All those mortgage brokers that used to sell the mortgages that maybe got a lot of us into trouble, are now working for firms that sell gold.
Schutz manages millions for Burhman, but the only gold he's bought is in his wife's jewelry box. And investors who are buying this time around want the actual, physical bricks. JPMorgan said yesterday it would reopen an old gold vault.
Futures trader John Thorpe is with Cannon Futures Trading.
John Thorpe: People want something that they can hold on to, and gold over the history of time has been a tremendous store of value and sense of security for people.
And could there be a prettier security blanket than gold with its yellow glitter and shine? Today's investors, though, are after more than luster. Mark Williams is a risk management expert at Boston University.
Mark Williams: Investors themselves are rushing in, there's no other ways in which investors can see getting high returns, so they're moving into gold and off into junk bonds again.
Williams calls it a gold bubble, that will eventually burst.
I'm Janet Babin for Marketplace.
The same amount of gold that could buy you a great suit in 1929...can buy you a great suit today. But if things go to hell, no one wants a soft metal that only works in computers that may be useless after an electromagnetic pulse that precedes a nuclear detonation. Food, medicine, gas, bullets, in that order, will be the currency then.
As the famous quote goes, when the man on the street is giving you financial advice...its time to sell. The suckers have taken over. Of course, you may still make some money by buying high, and selling a tiny bit higher...since you won't probably be claiming a sale of gold on your income taxes.
I saw the Metropolitan Opera live HD broadcast of Wagner's das Rheingold yesterday. Among the features of the set was a computer-generated graphic where the Rhine maidens were generating bubbles. The amount of bubbles for each maiden was dependent on the amount of movement, or the volume of singing for the maiden. The more the maidens thrashed or the louder they sang, the more bubble activity surrounding the gold that they were hoarding. How appropriate!
"...gold is looking like a good way..."
I agree with David. Gold MAY HAVE BEEN a good investment about ten years ago, but this is a commodity whose main value is dependent on economic things getting worse. It's hard to imagine how things could get much worse than 20 years of spendthrift government spending and secretive multi-trillion dollar Fed Reserve printing-and-bailing to the megabanks.
My advice is to sell yours in a few months, preferably before the bottom falls out under this, the latest bubble in an economy full of speculative bubbles.
Gold may be a bubble. But unlike real estate, stock, bonds, and above all modern currencies, gold has both inherent value and a supply that's tremendously expensive to inflate. That means that when any of the others do undergo inflation or hyperinflation of its supply, unlike the inflating commodity, gold will retain its value. We should be worried about the policies that are driving an expectation of imminent hyperinflation more than about a gold bubble.
