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Gold glittering record price
01/09/08

Gold futures surged to a record Tuesday as traders bet that rebounding oil prices will keep boosting demand for the precious metal.


It's the stuff of western dramas where rugged men went looking for it in the mountains. It's the shiny metal used in fancy jewelry, the highest honors for sports and the bars tucked away in heavily secured safes. And these days, gold's appeal as a safe-haven investment has carried it to record prices.

Gold futures surged above $880 Tuesday to their highest level ever, not accounting for inflation, propelled higher by rising oil prices and a weak U.S. dollar.

An ounce of gold for February delivery climbed as high as $884 on the New York Mercantile Exchange, topping by almost $10 its previous record of $875 set in 1980, and later settled at $880.30, up $18.30. Gold for January delivery was close behind at $878.00.

Market analysts who have watched gold's ascent weren't surprised that gold reached a high.

"I'm telling my friends," said Ashraf Laidi, an analyst at CMC Markets. "I've told them for the past three years to invest in gold."

Still, when adjusted for inflation, gold remains far short of the jaw-dropping levels of 28 years ago. An ounce of gold at $875 in 1980 would be worth $2,115 to $2,200 today.

Gold that cost $650 an ounce in January 2007 has soared on rising oil prices, the falling U.S. dollar and global unrest.

"We are still getting a fairly even mixture of buyers and sellers," said Mike Anderson, a salesman with Tulsa Gold & Silver. "A lot of sellers who maybe have been holding gold for 15 or 20 years, now it's finally giving them a profit."

But Anderson said he's also seeing gold buyers who are "coming in with a fear of the supbrime mortgage, the government printing too much money and the price of oil."

A lot of people still feel that gold is a good investment, Anderson said, noting that gold has gone straight up since August 2007.

Gold prices normally take a breather in the springtime, and Anderson said he suspects that will be the case in February or March. But he also thinks that gold will be in the $900s this year.

"Gold should be in everyone's portfolio, but it shouldn't be a majority," Anderson said. "I sell gold to people, but I never recommend it should be the majority of their investment. It has its own place in your portfolio."

Jim Eagleton, vice president of investments for A.G. Edwards & Sons Inc. in Tulsa, said his phone has been ringing with people wanting to buy gold.

"Historically, it's been a poor investment unless you happen to hit the right period of time when it makes these gigantic spikes," he said. "Inevitably, the advertisers start marketing gold bullion and gold futures and gold coins after the gigantic run."

He noted that in the last 20 years, gold has had five good years, including 2002, 2003, 2005, 2006 and 2007.

"If you bought gold 20 years ago, you would have made an average annual compounded return of 2.2 percent," Eagleton said.

Eagleton, who thought gold was overpriced a year ago, said he wouldn't put money in gold at current levels.

"I'm not smart enough to call the top, but the best way to consistently lose money is to buy last year's home run," Eagleton said.



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