Gold Investors Endure A Wild Ride

In times of economic uncertainty, many investors run to gold in search of refuge. According to Forbes Magazine, investors have poured $12 billion into the SPDR Gold Trust ETF (GLD). The ETF closed at 103.92 today.

Gold may be thought of as safe, however, gold values have been on a rollercoaster ride for the past couple of years.

In March 2008, gold moved above $1,000 per ounce for the first time ever. In the following months, gold entered a steady decline toward $700 per ounce in November. Since then, it has steadily risen to its current level of approximately $1,060 per ounce.

So, after a 50+ percent return inside of twelve months, has gold maxed out or is there more room for growth?

On the supply side, gold mining is on the rise and some analysts believe the excess supply will be enough to lower prices. On the demand side, this year industrial and jewelry demand is down about 20 percent. However, many investors are looking to a weak dollar and rising inflation as signs that gold will continue to rise.

Jon Nadler of Kitco says gold fundamentals are some of the “poorest” he has seen in a long time. Fund manager John Hathaway (Tocqueville Gold Fund) suggests gold could rise to $5,000 or even $10,000 per ounce.

The mixed signals and mixed opinions keep it interesting, but the recent gold ride has been a bit too bumpy for my taste. It seems the bumps in the road are all that is guaranteed.

Even if you find gold attractive at this level, be sure to keep other assets in your portfolio to balance out the bumps.