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A glittering comeback

With gold at a 25-year high and silver close to $10 an ounce, both are showing their precious mettle. Some investors are taking notice - again.

By HELEN HUNTLEY
Published January 28, 2006

The good times are back for those ever-patient investors who put their money in metals.

Gold hit a 25-year high Wednesday at $562.20 an ounce and finished the week at $558.70. Silver is approaching $10 an ounce, a level it hasn't seen since 1984. It closed Friday at $9.65 an ounce.

The weak dollar and concerns about war, terrorism and inflation are driving the market, and small investors are going along for the ride.

"We've been doing a landslide business," said Art Arbutine, founder of Belleair Coins in Largo. While some of his customers are buyers, even more are sellers eager to unload gold and silver they've been hanging on to for decades.

"A lot of people have had a loss for so many years and finally they have a profit, and they're happy to get out," he said.

Gold's primary allure is its tangible nature, plus the fact that its value is recognized around the world. Its popularity surges in times of war and uncertainty. The decline in the value of the dollar and the rising U.S. budget and trade deficits have contributed to gold's appeal, as has demand for gold jewelry in fast-developing countries such as India.

"It's nice to have something you can hold in your hand instead of just a piece of paper," said Poul Madsen, 63, a retired restaurant owner in St. Petersburg. He likes the security of the gold and silver coins he owns, even though he doesn't consider them a good investment: "I've probably had about a 3 percent return over the years. I could do much better on anything else."

Others think gold looks better than their investment alternatives. In fact, gold prices rose 18 percent last year, handily outperforming the Dow Jones Industrial Average, which recorded a small loss.

Investment potential is the appeal to Doris Relko, 71, a Spring Hill nurse:

"I'm not too sure about the stock market," she said. "I think gold will be there; it's never going to go away."

You don't have to choose between gold and stocks. Investors have flocked to gold-mining stocks such as Newmont Mining Corp. and Freeport-McMoran Copper & Gold Inc. Now even smaller gold mining companies, which have higher production costs, are benefiting from the surge of interest.

Mutual funds that invest in gold stocks have been huge winners as a result of the trend. Gold-oriented funds rose 30.5 percent last year and are up 13.8 percent so far in January, according to Lipper, a Reuters company.

But investing in gold is not for the faint-hearted. A gold-buying frenzy in 1979 and 1980 drove prices of the precious metal up to more than $800 an ounce. Investors have lost lots of money on gold, especially when inflation is taken into consideration. The $800 an ounce some paid in 1980 is the equivalent of $1,896 today.

"Unless you're planning on your country completely collapsing, you have no real need for gold," said Robert Bucklin, 69, a retired psychologist in Zephyrhills. He owns some gold coins inherited from a great uncle, which he keeps in a safe deposit box. "Until I sell them, I've achieved little or nothing. Gold has to be stored somewhere and it doesn't pay any dividends."

The most popular way to buy gold is in 1-ounce coins, which sell for a premium above the market price of gold.

The premium will vary by dealer, but a typical surcharge would be $10 for a South African Krugerand, $20 for a Canadian Maple Leaf and $25 for an American Eagle.

Popular ways to buy silver include American Eagle coins, which have a premium of about $2; silver rounds or rectangles made by private companies, which have premium of about 50 cents; or bags of pre-1965 U.S. silver coins.

Dunedin retiree Forney Winner, 92, said he's owned gold for decades, but considers it a bad investment.

"But it makes a very nice gift," he said. "People get a kick out of it."

Helen Huntley can be reached at hhuntley@sptimes.com or 727 893-8230.

Friday's closing price: $558.70

Cost of American Eagle gold coin: About $25 more than a day's closing price

Friday's closing price: $9.65

Cost of American Eagle silver coin: About $2 more than a day's closing price

[Last modified January 28, 2006, 01:37:10]