Related topics: gold, ETF, commodities, investments, mutual funds
Gold continues its upward march in a time of global financial tumult, closing above $1,500 an ounce last week for the first time as investors seek a safe haven in the metal.
In a remarkable performance for any sort of asset, gold notched a record high every day last week -- on days when investors were alternately gloomy and optimistic. On April 18, as stocks swooned after Standard & Poor's warned about the credit rating of the United States, gold reached a new high. It kept rising on April 19 and again on April 20, as stocks soared on impressive corporate earnings.
On April 21, gold rose $4.90 an ounce to $1,503.20, another nominal record high and its first settlement above $1,500.
The reason for gold's ability to do well in any market lies in its recent role as a haven from concerns about the dollar, inflation and shocks in Europe, the Middle East and Japan.
"Gold has more than one hat right now," said Adam Klopfenstein, the senior market strategist at Lind-Waldock, a division of MF Global. "What people are seeing around the globe is that there's really nowhere to hide right now. When one camp cools down on buying gold, you are seeing another camp come in."
Gold's rise is a reflection of a broader lack of confidence in the ability of governments to sort out their fiscal problems.
Investors are concerned, and not only about the value of the U.S. dollar, a worry accentuated by S&P's decision to downgrade the U.S. debt outlook. They also are concerned about the outlook for the euro, as the sovereign debt crisis in Europe worsens, and the yen, which faces hurdles as the Japanese economy tries to recover from the March earthquake and tsunami.
From university endowments to small investors
Compared with currencies, gold is seen as a lasting store of value.
"If you have two major currencies looking a little bit wobbly, some investors and speculators put their money into gold," said Barry M. Wainstein, the global head of Foreign Exchange & Precious Metals at Scotia Capital, a subsidiary of Bank of Nova Scotia.
Some currency traders have recently sold their positions and bought physical gold, he said. As the metal soars 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 store the bullion, and are stepping up hiring to deal with the extra workload.
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.
Gold has scaled new heights in all currencies. In dollars, gold rose 1.2% last week, in euro terms it rose 0.9%, and in pounds it was up 0.5%.
