Gold Still the Focus for Investors

Strong investor interest in gold has led to impressive returns for bullion and gold companies.

The gold price has soared to $985 an ounce, nearing its all-time high of $1,014. That record was set last March, at the height of the U.S. banking crisis. The price then fell sharply as gold joined every other asset class in being dumped by investors, touching $700 by October. Through much of last year, the U.S. dollar was the safe refuge of choice.

Investors, still shell-shocked from the financial crisis that engulfs the world, have now turned to gold as a safe haven. Recognizing the vulnerability of the dollar, investors have a hard time finding a currency that doesn’t look shaky. Government bailouts are piling trillions of dollars worth of debt onto every major economy.

Investors are becoming more aware that debts of that magnitude are leading to massive increases in money supplies. Over time, that money will become less valuable in relation to hard assets, with gold being the most evident.

The shares of gold companies are also benefitting from the growing investor interest in bullion. The gold companies presented in the three December issues have all done well, with gains of as much as 8-fold in that couple of months.

Gold will certainly go higher over time. However, there is no assurance that the price will move in a straight line. History tells us that the gold market is subject to violent swings as investors and other participants in the gold market change their mood. At this time, some of the gold companies that have delivered big gains are beginning to look expensive. We are watching the situation carefully and will have more to say in the coming weeks.