Good Question: Why Are So Many Investing In Gold?

MINNEAPOLIS (WCCO) — As the stock market continues to lose value, gold continues to soar.

While the Dow Jones Industrial average dropped more than 500 points Thursday, gold touched a record high, nearly $1685 an ounce, before settling in at a closing price of $1659/ounce. So, why are so many people investing in gold?

“There are two things going on,” said Bart Ward, CEO of Ward and Company, an Anoka investment firm that specializes in investing in gold mining and production companies.

“You have this safe-haven feeling. Some people believe that gold is the ultimate currency,” he said.

There was a time that every dollar in the U.S. was literally backed by an equivalent value of gold. There are those who believe the U.S. dollar and world currencies will collapse in a global crisis, leaving gold as the new currency.

“Then there’s the general flight to safety,” said Ward.

When markets tank, people still want to put their money somewhere other than just cash, commodities like gold, silver and oil are often choices. After all, if your gold loses much of its value, you still have a physical piece of gold.

“All the gold mined is still in existence above earth,” said Ward.

In 1980, gold was sky-high at a record price of $873/ounce. Then gold went out of favor and, for 20 years, stocks were king. It wasn’t until the last decade when gold started a slow, steady climb upwards.

“Wall Street hasn’t really jumped all over gold. You don’t have a lot of firms recommending gold. A lot of analysts are pooh-poohing it on the business networks,” said Ward.

However, Ward doesn’t think gold has hit its peak yet. If you take the 1980 and adjust it for inflation, Ward says there are those who think gold should be selling for $2200 to $2300 an ounce.

“I have a difficult time with that forecast,” he said. “Markets don’t give you what you want. They’re not rational.”

Still, all the attention and all the commercials about buying gold does help the market, according to Ward.

“Commercials play an important role, because they shape investor psychology,” he said.

However, just as there was a dot-com bubble and a housing bubble, there’s a chance that there will be a gold bubble.

“I think gold’s in a long-term bull market. It will top out at some point like all markets do. It could be pretty wild when it does. It may not be,” he said. “We’ll have to wait and see.”

Ward said you don’t have to buy literal gold coins to invest in the market. His firm invests in companies.

“You can invest in gold mining companies. This is what we do. We don’t own the physical metal,” he said.

So, is gold safer than stocks?

“It is as long as it goes higher. Nothing’s safe if it goes lower,” said Ward.

More from Jason DeRusha
  • Fast Freddie

    Gold is real money, dollars are paper notes. They are printing too many paper notes. It’s pretty simple.

    Google Ron Paul/ Gold and find out why he needs to be President. He understands that paper money -ALWAYS returns to zero.

  • Mike

    Gold is high because it is experiencing a bubble, not unlike what happened in housing. It’s a matter of time before the sheep will be walked off the cliff at the expense of the highfalutin.. Guaranteed.

    • Mike Hawk

      I agree to your statement to the point of buying GOLD STOCK. Stocks are just paper & the snake oil salesman in this artical would love it if we all bought some what he’s selling. Just another Wall Street scammer who’s wrecking the world.

  • Jake

    Laugh at gold buyers all you want, but people are cashing in on it big time right now, and I think that the trend will continue as long as idiot politicans fail to get their houses in order. Korea and Thailand just bought TONS of gold to secure their governments’ finances. It will continue to go up, the only question is how high will it go before people start selling.

  • hard rains

    It spiked in the 80’s too, then crashed…now that the prices are inflated once again, buying it now is a possible risky gamble. If one has it tucked away from back a couple decades ago, when the prices were low, it’s a possible but slight risk selling it now. Buy low sell high. Gold only spikes during times of economic hardship. Well…that, and economic manipulations.

  • don

    i guess my gold eagle must be very special because it’s certainly a lot bigger than a quarter.

  • Kathy

    Save your money. If the dollar isn’t good anymore, gold will buy you nothing.

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