Investing  |  SEP 2002

Working Money: Heavy (Precious) Metals by Jeff Dufour

Working Money: Heavy (Precious) Metals by Jeff Dufour The whys, whens, and hows of investing in gold and other precious metals. After a long lapse from the consciousness of the investing public, gold is glittering again. Earlier in 2002, the price of gold broke the $300/oz. threshold for the first time since 1999. Precious metals mining stocks and gold-laden mutual funds have soared, even as the Standard & Poor’s 500 continues to lag. Yet precious metals — gold in particular — are one of the least understood and most controversial investments around. Once thought of as the only true storehouse of wealth, gold now stands very much as an alternative investment. Concerns about the US dollar, the geopolitical situation in the Middle East, the rising price of oil, and the first warning signs of inflation all have led to renewed excitement in these assets. “There’s more interest in gold now than in the last 15 years,” says Peter Hillyard, senior manager at the London office of ANZ Investment Bank. “Israel, Iraq, additional troops in Afghanistan, higher oil prices — the list is endless. In that environment gold goes up. . . . There’s enough going on to add gold as a portfolio diversifier.” In times of uncertainty, investors reach for tangible assets. And there’s no asset more tangible than gold. Most people still associate it primarily with expensive baubles in Fifth Avenue storefronts or glittering bars locked deep in secure vaults. One major advantage of gold is that it’s one of the only asset classes that is not simultaneously someone else’s liability. Further, when you purchase gold, you can safely assume that unlike stocks or even currency, it will always be worth something, as it has been throughout most of recorded history. These attributes make it a historically safe harbor for wealth, and insurance against economic catastrophe.

by Jeff Dufour