Is it too late for gold fever?
Is it too late to buy gold? It soared to a record $1,770 an ounce on Tuesday after the United States suffered its first-ever debt downgrade at the hands of Standard & Poor's.business Updated: Aug 10, 2011 01:29 IST
With gold rising 30% this year and nearly 400% over the past decade, it's reasonable to ask when the fever might break. In recent days it's gone completely viral as the debt crisis plunged financial markets to the biggest losses in two years.
"People who weren't talking about it even six months ago are heavily interested in gold today," says Frank Trotter, president of EverBank Direct in Jacksonville, Florida, which holds nearly $500 million worth of precious metals in the form of hard assets for clients.
In 2008, gold dropped by 20% as the US dollar became the safe haven of choice.
Now, "the world's best credit, the US government - has been downgraded," says William Rhind, managing director of ETF Securities. "It's no longer as safe."
Financial adviser Jeffrey Sica says it's not too late to profit from gold - he sees 20% to 25% upside ahead.
And gold is not overvalued even at these levels. Rhind points out that it hit $873 in 1980. Adjusted for inflation, the equivalent would be over $2,391 today.
Among doubters, though, are people like Pat Dorsey, vice chairman of Sanibel Captiva Trust Co, which manages $500 million.
"I've never been a fan of gold. I am in the camp that thinks it generates no income and has no utility (like copper), so the valuation is based on opinions of people," Dorsey says.