Market, Y2K woes help gold lose tarnish
By Tony Munroe/Boston Herald
For people who lived through the Great Depression, gold was considered the only real safe investment.
But over the last 20 years, investing in gold or other precious metals has fallen out of favor, as stocks and bonds have performed phenomenally well, and a new generation of investors has not yet lived through a prolonged bear market. Prices of gold and precious metals have been flat accordingly.
Low inflation rates over recent years have also conspired to keep down the price of gold - which was long used as a hedge against inflation.
''The gold price doesn't appear on TV anymore,'' laments John Meury, senior vice president for precious metals at MTB Bank in New York.
But Meury still likes gold.
Thanks to an uncertain stock market and worry over the year 2000 computer problem, gold is enjoying a small comeback, with prices up about $20 an ounce in recent months.
MTB Bank, which supplies coins and bullion to retailers and wholesalers, has seen demand double from a year ago for buillon, and grow even more for one-tenth and one-quarter ounce gold coins, Meury says.
''The survivalists seem to be out in force again with this year 2000 thing. They're probably filling up their bomb shelters,'' Meury jokes. ''People are extremely scared that they're not going to be able to do anything that day,'' Meury says of Jan. 1, 2000.
With gold trading at low valuations, precious metals are attractive, Meury says. Silver has similar investment characteristics as gold, while platinum is more an industrial commodity than financial instrument. Meury likes all three.
The pluses: ''It's convenient. It's liquid. Now it comes in so many different sizes and metals. And they're portable.''
He says metals should be seen as a diversification vehicle, accounting for just a small share of an investor's portfolio. And investors should diversify their holdings, perhaps with platinum and silver, he says.
But Susan Kaplan, president of Kaplan Financial Services in Wellesley, says gold's time has passed, as evidenced by the lukewarm reaction of the precious metals markets to the recent stock market turmoil.
''Normally, gold would be shooting through the roof and would be $800 an ounce again,'' Kaplan says.
But many countries now back their currency with greenbacks instead of gold, quelling demand. And inflation is far less a worry right now than deflation.
Besides, Kaplan says, when one invests in gold, they get ''no interest. No dividends. No 5 percent in the money market. No nothing.'' And investors must pay to store their gold.
Gold is so cheap right now, says Fred Schultz, president of Beacon Fidciary Advisors in Chestnut Hill, that speculation is the only reason to invest in it.
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