Golden Life Raft for Investors?

By Mike Schuster Feb 10, 2009 2:45 pm

Brief scrutiny of today's headlines.

Comment

As concerns over the global financial system pile up, gold is selling like shimmering hotcakes. By and large, investors are avoiding risky assets and snatching up gold bars and coins in record quantities.

The Financial Times reports that the US Mint sold 92,000 ounces of its American Eagle coin in January alone. That's nearly 4 times the amount it sold in January of last year, and even more than in the first half of 2007.

The blizzard of gold sales is global in scope, and a strong sign of a safe-haven purchasing trend, according to John Reade - a precious-metal strategist at UBS. And as the credit crisis continues with no end in sight, gold prices and sales remain on the rise. In fact, Reade predicts that demand in gold could double in 2009 compared to 2007.

Uncertainty over the new US stimulus package has been keeping gold futures hovering around $900 an ounce for the past 2 weeks. However, bankers are noticing more and more of their richest clients are hoarding gold in their vaults. If this continues, UBS and Goldman Sachs claim prices could be driven past $1,000 an ounce.

Despite a decline in jewelry demand, and a hold on a price rally in Turkey and the Middle East, investors aren't giving up. Jonathan Spall, director of commodities at Barclays Capital in London, sums up the demand thus: "We have seen more new inquiries about investing in gold so far this year than during the whole of 2008."Twitter: @mcs212