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April 02, 2009

Glittering gold

Gold as an investment has had a good run in recent years and is now flirting with a value of $1,000 per ounce. Why are investors flocking to gold, and will it continue?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"Gold always does well as an investment during periods of economic anxiety, and we certainly have that now. During these kinds of economic times, people look to where they can put their money - store their money - in what they consider to be a safe place. And many people think that gold as an investment doesn't lose value, so we've had a lot of folks simply flocking to gold. But I would throw out a word of caution. Gold values can go down, although they have certainly gone up over the past couple of years on trend, they can go down. For example, earlier this decade, gold was under $500 an ounce. As you mentioned, it's now about $1,000 an ounce. And through most of the 1980s and 1990s, gold values actually fell. So again, beware investors, if the economic clouds part, and the sun comes out, we may very well see gold go down very quickly. Another point, how high does gold have to go to set a record? It would have to go in today's dollar values up to $2,300 an ounce to equal the peak in purchasing power it had in 1980."

Posted by Dave at April 2, 2009 08:00 AM