The Gold Bug Bites

April 22nd, 2011

And the whole world is infected by the fever
I grew up in a country where the price of gold was breakfast, lunch and dinner fare. We all knew the price of gold and could quote it any time of the day or night. In those days it hovered around $30 per ounce and no one had enough money to buy any.

$1500
Yesterday gold continued its upward march in a time of global financial tumult, closing above $1,500 an ounce as investors seek safe haven in the metal. In a remarkable performance for any sort of asset, gold has notched a record high every day this week, on days when investors were alternately gloomy and optimistic. On Monday, as stocks declined after the Standard & Poor warning about the credit rating of the U.S., gold reached a new high. It kept rising on Tuesday and again on Wednesday, as stocks soared on impressive corporate earnings.

Buying gold
Some currency traders have sold their positions and bought physical gold recently. As the metal barrels higher, investors of all stripes are jumping in. And buyers are increasingly taking possession of gold, instead of trading futures contracts.
Everyone from university endowments to small individual investors has been buying bars and coins. Operators of storage vaults are scrambling to find more space to shelter the bullion, and are stepping up hiring to deal with the extra work load.
The metal has rallied despite the interest-rate hikes by the European Central Bank and the People’s Bank of China in early April. A higher interest rate means a higher return on cash, and typically is negative for gold, which yields nothing. However, gold investors took the rate increases in stride.

India
Demand in India, the largest consumer of gold, is likely to fade once its festival season ends with the arrival of the monsoons in June, said Jeffrey Rhodes, global head of precious metals at INTL Commodities, a commodities broker.

Losing allure
Gold could lose allure if investors conclude that the world has returned to a safer investment environment, where growth is sustainable without extraordinary government support. If that happens, he said, “the reasons for investors moving into gold start to reverse.” Because so many have piled into the market so quickly, the risk of a swift reversal becomes ever greater. The gold market, while popular, is relatively small compared to stocks and bonds, making it more sensitive to sentiment swings.

How much do you have?
We all have gold. Some of it is in fillings in our teeth, a lot of it is in our wives jewelry and maybe there are also men out there who sport a gold chain around their necks. Even odd articles of clothing may include a gold brooch or pin. What about that old clock on the mantel shelf? There are also items of gold cutlery and presentation pieces earned for winning a tournament. How about your watch or did you melt that down when the gold price hit $800?

This entry was posted on Friday, April 22nd, 2011 at 4:43 am and is filed under Economy, Employment, Finance, Money, Personal / Internet. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Leave a Reply

Click here to cancel reply.

Name (required)

Mail (will not be published) (required)

Website