WARNING: This is Version 1 of my old archive, so Photos will NOT work and many links will NOT work. But you can find articles by searching on the Titles. There is a lot of information in this archive. Use the SEARCH BAR at the top right. Prior to December 2012; I was a pro-Christian type of Conservative. I was unaware of the mass of Jewish lies in history, especially the lies regarding WW2 and Hitler. So in here you will find pro-Jewish and pro-Israel material. I was definitely WRONG about the Boeremag and Janusz Walus. They were for real.
Original Post Date: 2001-11-19 Time: 15:10:19 Posted By: Jan
By Clint Willis
BOSTON (Reuters) – Remember when gold was hot, trading at $850 an
ounce? Not to worry if those glory days are long forgotten — after all, it
was more than two decades ago.
Since peaking in 1980, the price of gold has declined by about
two-thirds.
While some investors are buying shares in gold funds again, the
question is, should you join them?
Funds that invest in gold bullion and precious metals mining stocks
rose29.9 percent in the 12 months through October. That compared to a 23.2
percent decline for the typical stock fund.
The big gold gains in part reflect the falling stock market, which has
sent investors scurrying for alternatives to traditional stock funds.
In addition, the Federal Reserve has made 10 interest rate cuts since
January to stimulate the sagging economy. Trouble is, too many rate
cuts could create inflationary pressures — and gold has performed well
during past periods of high inflation.
Gold also has been seen as an investment of last resort during times of
political crisis. When the September terror attacks raised the specter
of war and further domestic disturbances, some investors turned to gold as
a potential safe harbor.
More recently, Newmont Mining Corp. raised interest in gold with its
bid for Australia’s largest gold miner, Normandy Mining. Ltd. Newmont is also
offering to buy Canada’s Franco-Nevada Mining Corp. Ltd., which owns
19.9 percent of the Australian company.
The combined group would command an annual output of more than 8
million ounces of gold from its mines spread across five continents on
property the size of Great Britain.
Some investors are drawn to gold on the simple ground that it has
become so much cheaper over the past 20 years, figuring that markets tend to
move in cycles. True, gold funds have lost 15 percent annually during the
last five years, but that’s because low inflation, low interest rates,
surging stock prices and a strong economy made stocks and bonds attractive
alternatives to gold.
Now those other investments are looking shaky and gold is poised to
make up for its long period of wandering in the financial wilderness — or so
the new goldbugs hope.
They could be right, but don’t bet the farm on it. For starters, the
economy should see improvement in the coming year, leading to a surge in
corporate profits and big gains for many battered stocks across a range of
industries. That alone could dampen enthusiasm for gold funds.
An economic rebound probably will fuel mild inflationary pressures. But
few economists predict the kind of sustained surge in prices that might
kick off a long-term bull market in gold. Reason: Technology has greatly
increased worker productivity during the past decade, and most countries have
plenty of labor and factories to meet demand during the next economic
rebound. What’s more, gold rarely hangs on to the gains it picks up during a
crisis.
Gold’s 20 percent or so surge after the Sept. 11 attacks began to
evaporate almost immediately. The metal recently traded 5.2 percent lower
since the September gains, and precious metal funds have declined 0.41
percent.
Finally, remember this fact: Gold’s price ultimately reflects simple
supply and demand. It costs most mining companies $250 or so to produce an
ounce of gold — which is why mines don’t supply enough of it to meet demands
for jewelry. That shortage would boost the price of gold, except that most
central banks have excessive reserves, which they use to meet extra demand.
Finally, remember that while gold funds are known as a safe harbor
during hard times, they also carry their own risks. The average gold fund
plummeted 42 percent in 1997, as a strong economic low inflation environment
caused investors to pile into blue chips and technology stocks.
That said, gold funds march to a different drummer. That means they can
supply important diversification benefits — as they did during the
past year or so.
If you decide to invest a modest sum in gold funds, one solid pure-play
offering is American Century Global Gold (800-345-2021; $2,500 minimum
investment; no load). The fund favors gold-related shares and largely
shuns other metals such as platinum and palladium. That has helped the fund
post a 51 percent return during the past year — a period when the price of
gold surged ahead that of other metals. What’s more, the fund boasts a low
expense ratio of 0.67 percent.
(Clint Willis is a freelance writer who covers mutual funds for
Reuters.)