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What’s so special about gold?

Janet Babin Oct 5, 2010

What’s so special about gold?

Janet Babin Oct 5, 2010


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.

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