Gold Adds Weight To Its Worth Investors Take Notice Of Spike September 29, 1999 – Posted in: Press
By THOMAS A. FOGARTY
Published: September 29, 1999
USA Today
Tobina Kahn spent most of her morning Tuesday in Chicago bank vaults, appraising the personal treasures of potential sellers eager to cash in on the spike in gold prices.
“We’ve been bombarded. It’s a fascinating phenomenon,” Kahn says of the increase in customers since the dramatic upturn in gold prices over the past two days.
The boom in Kahn’s business is one element in the fallout from this week’s sharp increase in gold prices, which had been languishing near 20-year lows since July.
The increase in gold prices also has prompted a wave of investor interest in owning the metal itself, gold-oriented mutual funds and stock in gold-mining companies. Financial professionals urge caution.
Gold and related investments have been notoriously hazardous for investors. The price of gold, even with the recent spike, remains far below its historic peak of more than $800 an ounce in 1980.
Gold-oriented funds, over five years ended June 30, have had the worst performance among 35 fund categories tracked by Lipper. Gold funds lost about half their value.
The price of gold rose Tuesday to $308 an ounce, up 9% from Monday. In two days, the price has risen about 15%.
At the urging of European Central Bank President Wim Duisenberg, the central banks of Europe agreed to limit their gold sales over the next five years. Investors’ anticipation of constricted supplies of the precious metal, coupled with uncertainty about interest rates, inflation, the dollar and the Y2K bug are cited as reasons for the rally in gold prices.
Bill Wilby, a portfolio manager at Oppenheimer mutual fund group, expects a “very short, very powerful” rally in gold prices. He says the effect of the capped sales by European banks will constrict supplies only slightly. The market may also be boosted by skittishness over the effect of the Y2K bug on more conventional investments, he says. But central banks around the world could kill the rally by deciding to cash in on the higher prices that the European banks helped create.
“We could get a significant rally possibly through the end of the year,” Wilby says. “But I think all this is a short- term, two- to three-month phenomenon.”
The price of the Oppenheimer Gold and Special Minerals Fund has risen more than 15% since Friday.
Mark Bass, a financial planner from Lubbock, Texas, says the higher prices of the past two days could be the beginning of a relatively long-term gold market change. This would be a good time for investors to consider gold funds or investing in the metal itself, he says. “It would be a good time for those folks who can stomach that kind of volatility.” He would caution clients to keep gold investments to less than 5% of their portfolio.
Kahn, the Chicago jewelry appraiser, says her company has been paying a premium for gold jewelry this week.
For example, Kahn says she paid $8,400 Tuesday for an evening purse made with 6 ounces of gold, an inheritance of a woman she described as “a soccer mother.” The same item would have fetched $1,000 less just last week, Kahn says.