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The Honolulu Advertiser
Posted on: Sunday, May 30, 2010

With prices rising, the future is gold


By Tiffany Hsu
Los Angeles Times

Hawaii news photo - The Honolulu Advertiser

Gold is one of the few commodities that has been rising despite the growing strength of the dollar.

CHRIS RATCLIFFE | Bloomberg

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For years, the biggest fans of gold weren't taken very seriously. Now they're looking downright prophetic.

Gold futures have risen for several weeks, breaking records along the way. If you invested $10,000 in gold two years ago, it would be worth nearly $14,000 today a return of just less than 40 percent.

While fans of the shiny metal have sometimes been dismissed as "gold bugs," the fact is that gold has been rising in value every year since 2001, when an ounce of gold was selling for $279. A $10,000 gold investment then would be worth more than $30,000 today.

That's why the precious metal is beckoning Katherine Gorell, 34, a communications coordinator in Miami.

Her stock portfolio has shrunk nearly 5 percent since 2008, and she lost about $1,000 in the "flash crash" alone.

"You just can't predict the market, and I'm not so sure we're going to have a recovery," she said. "Gold is one of those things that people have always thought was safe."

She's held off though, partly because the price is now so high.

"And if I don't physically have the gold, I don't know if that's any safer than having a mutual fund," she said. "But I'm worried that if I keep mulling and don't act, I'm going to keep losing value" in the stock portfolio.

Some analysts are even anticipating that gold will hit $1,400 in the near future a far cry from two years ago when $1,000 for an ounce was considered as realistic as finding the lost city of El Dorado.

"We're going to see some explosive movement in gold," said John March, chief technical officer for gold trading firm Superior Gold Group in Santa Monica, Calif. "We're looking at something that doesn't have a lot pushing it down but a lot pushing it up."

Over the next eight years, March expects to see an average annual boost of 20 percent to 25 percent in the price of gold.

Investors are ducking into the precious metal amid concerns about volatile stock and bond markets and the worldwide implications of Greece's financial problems. And this time, the growth is happening despite a strengthening dollar, which usually suppresses the metal's price.

On Friday, gold settled at $1,227.40, a record.

Gold is one of the few commodities that is rising while others such as platinum, palladium and silver have been sliding with the improvement in the dollar.

Oil also has been slipping. Light, sweet crude futures for June fell $2.79 on the New York Mercantile Exchange to $71.61 a barrel Friday. On May 3, it closed at $86.19 a 17 percent drop.

But silver sometimes known as "poor man's gold" rose to $19.20 an ounce Friday as investors who couldn't afford gold bought the cheaper metal.

Many investors are losing faith in paper-based currencies such as the euro and the pound, whose value has been falling.

In Europe, banks are running out of gold to sell, while the South African government rushes to ship more Krugerrand coins, analysts said.

"You have a world financial system in crisis, and it's quite scary," said Ken Edwards, vice president of Inglewood, Calif., bullion dealer California Numismatic Investment. "It's causing people to look again at where their assets are sitting and they're heading to safety. The picture of safety is gold."