Gold regains its luster

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Gold was out of sight and out of mind for most investors for more than 20 years while it consistently lost value and was widely considered to be a losing proposition. But recently the precious metal has regained its shine.The gold price reached a new all-time high of $865 a troy ounce within two trading days in 2008. It steamrolled past $920 an ounce by the last week of January, and some predict it might go well past $1,000. Spot gold prices closed on Friday at $923 a troy ounce."People are becoming increasingly willing to consider gold as other assets are underperforming," said George Milling-Stanley, a spokesman for the World Gold Council in New York.Although gold no longer is used as currency in modern society, it is an enduring form of money that people still rely on as a way to hold their wealth and diversify their portfolios when they become nervous about assets such as stocks and bonds.As the housing and credit crisis lingers, stock prices tumble, interest rates fall and the dollar weakens against other currencies, gold, silver and other precious metals have thrived.Still, some investors avoid gold because it does not pay a dividend or generate a stream of income. Also, while its price has increased threefold in six years, there is concern as to whether it can maintain the momentum.As an investment, gold is often misunderstood and viewed with a certain amount of suspicion by people who are unfamiliar with the precious-metals market.Buying and selling gold can be very different from owning stocks and bonds, especially if an investor plans to take physical possession of the metal in the form of gold coins and gold bullion bars.But there are other ways to own gold indirectly by buying shares in gold mutual funds, gold-mining stocks, gold options and futures, and through gold exchange-traded funds.The World Gold Council three years ago pioneered the idea of gold ETFs so that investors could have a pure exposure to the gold price yet be able to easily buy and sell shares on a recognized stock exchange.The fund, which trades on the New York Stock Exchange as GLD, currently has $18.5 billion worth of gold owned by shareholders in its vaults, which represents 70 percent of all gold owned by ETFs."There is no bad way to invest in gold," Milling-Stanley said. "But the answer for individual investors may be different. It will take a certain amount of education before many investors really begin to get on board with gold. But more sophisticated investors are already there and that's one reason, among many, why we are at the levels we are at today."Gold has been a symbol of wealth and a form of money for thousands of years. People around the world still go to great lengths to mine it from the ground because of its beauty, rarity and timeless value. It is redeemable in any currency in any country in the world.And in times of economic turmoil and political unrest, gold is a means of storing value in a way that is not possible with paper currencies. Gold also is considered to be a good hedge against currency devaluations and inflation because its value often moves in the opposite direction of the U.S. dollar.But gold in past years has been largely avoided by many investors because it was a perennial money-loser. After hitting a record high of $850 an ounce in 1980, it fell continuously to $250 an ounce in 1999. The current gold bull market began in April 2001 when its exchange rate was at $255 a troy ounce."Gold will not collapse this time around," said James Turk, founder and chairman of GoldMoney.com, a digital storage company for gold that allows clients to buy and sell gold online.Turk, co-author of "The Coming Collapse of the Dollar," which was published in 2004, predicted the current subprime mortgage crisis, the credit crunch, the falling dollar and the rising price of gold."The U.S. dollar is still overvalued and gold is undervalued," Turk said. "So, it still makes sense to accumulate gold because there's still lots of potential for gold to appreciate as the great unwinding of the financial markets continues."(E-mail Tim Grant at tgrant(at)post-gazette.com.)(Distributed by Scripps Howard News Service, www.scrippsnews.com.)