Gold has climbed to record highs recently, topping $1,050 an ounce, and its admirers say it will keep on going, thanks to jitters about the world economy, the falling dollar and growing demand from commercial users.
Gold has been the financial fallback throughout history. So, is it a good alternative today to your certificates of deposit, money market accounts or other “safe” holdings?
Not if safety is your chief concern, though some gold holdings could help diversify a portfolio.
It’s much easier to speculate on gold than it used to be. No longer do you have to hoard jewelry or buy coins off a late-night infomercial. One of the easiest methods is an exchange-traded fund called SPDR Gold Shares (Stock Quote: GLD). Each share represents one-tenth of an ounce of gold, so the share price moves in tandem with the gold price. The fund has returned about 36% during the past 12 months, compared to 15.6% for the SPDRS ETF (Stock Quote: SPY), which tracks the Standard & Poor’s 500.
Many investors opt for funds specializing in mining-company stocks. Evergreen Precious Metals Fund (Stock Quote: ECWBX), is up up 115% during the past 12 months, for instance. The 73 gold-oriented mutual funds tracked by Lipper, the market-data firm, returned nearly 108% in the 52 weeks ended Oct. 15, beating all other fund categories.
Of course, the immediate question for would-be gold investors is: Is it too late? It’s always risky to jump on a bandwagon that’s been rolling for some time. If investor enthusiasm wanes, gold prices could drop.