Even small investor can get in on the gold rush
By John Waggoner
USA Today
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The symptoms are subtle at first. You start calculating the gold content of your high school graduation ring. Just curious, you say to yourself. Soon you begin hefting those gilded baby shoes. Then, one day, you find yourself melting the gold tip on your grandfather's cane, and you realize: You've got gold fever.
Join the crowd. "People are bringing in stuff their mother gave them, stuff they're not wearing, broken chains, broken rings, and walking out with $900, $1,000," says Richard Rozhko, owner of Howard Jewelry in Chicago. Silver, too. "They're bringing in knives, forks, spoons," Rozhko says.
No wonder. Gold briefly traded at $1,009 an ounce yesterday for the first time ever. And silver — often called the poor man's gold — has been soaring.
If you're hankering to buy gold, you may get to buy it more cheaply within the next month or so. Gold bullion has soared 52 percent over the past 12 months and 19 percent this year — and it may have gotten ahead of itself. But if you want to invest for the long run in gold — which can have a role in a diversified portfolio — you have three good options: gold bullion coins, gold exchange-traded funds and gold mutual funds.
Gold closed up $5.90 at $998.20 an ounce yesterday after briefly cracking the $1,000 barrier during the trading session. Pushing up gold prices are these factors:
Still, gold may have come too far, too fast, Holmes says. Gold prices correlate closely with oil and move in the opposite direction to the dollar.
Ultimately, the gold rally will end whenever the government jacks up interest rates and squashes inflation, potentially igniting a recession. Until then, gold has room to run, said James DiGeorgia, editor of the Web site Gold and Energy Advisor.
Let's say you're interested in buying gold. You could invest in gold futures, which are contracts to buy gold at a certain price at a certain date. Most small investors, though, would have more fun with their money by setting fire to it and dancing around it naked. Small investors in the futures markets tend to lose early and often.
A more practical way would be to buy gold bullion coins. The advantage: They don't need to be assayed for gold content and purity, and they're easily portable. (A London good delivery bar, the kind you see in movies, weighs 400 troy ounces, or 27.4 pounds.)
U.S. gold Eagles are a popular choice; they're 22-karat gold and easy to buy. (The American Buffalo 1-ounce coin is 24 carats.)
If you can't afford a 1-ounce gold coin, you can buy Eagles in weights of a tenth of an ounce, a quarter-ounce and half an ounce.
Another good way to invest is through gold exchange-traded funds. These funds buy gold bullion; one share is worth one-tenth of an ounce of gold. StreetTracks Gold Shares (ticker: GLD) and iShares Comex Gold Trust (IAU) are the two largest gold ETFs.
Finally, you might consider gold mutual funds, which invest in shares of gold-mining companies.
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