TOM HUDSON: It’s been a sparkling start to the year for gold. Gold posted its biggest gain for the year today, rising $23.50 settling at $1,748.40 in New York today. The metal’s rally has been virtually unstoppable for years. Erika Miller reports on whether is still pays to buy gold if the economy is heating up.
ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: There are gold
statues, Gold’s gym, even Gold pretzels. But none of those will make you
money. Here at the New York Mercantile Exchange, there has been a rush to
buy the yellow metal. It’s up 11 percent since the start of the year,
despite a sharp sell-off yesterday. Some traders believe it’s shaping up to
be another banner year.
ANTHONY NEGLIA, PRESIDENT, TOWER TRADING: I do feel that we are going
to see gold, probably mid-year, trading above $2,000.
MILLER: That would be a roughly 15 percent gain by summer. The big
reason many are forecasting big gains is continued concerns about Europe.
Even if Greece is able to avoid defaulting on its debt with a bailout plan,
that increases the risk inflation will become a more serious global
NEGLIA: The ECB is funding all of these things and how are they doing
that? They are printing euros. So, longer term, I do feel that gold is
probably going to be a better flight to quality asset than it is right now.
MILLER: But many investors are skeptical gold can continue to
sparkle. After all, Friday’s employment report suggests a brighter outlook
for the U.S. economy. And that, in turn, might prompt investors to favor
riskier investments like stocks. But many analysts believe that, even if
stocks do well this year, gold can, too.
PAUL CHRISTOPHER, STRATEGIST, WELLS FARGO ADVISORS: When the economy
has looked like it’s going to make a rebound, investors start looking
around for investments with the best yield. And as long as Treasuries and
the dollar have low yields, that would tend to support stocks and it would
tend to support gold.
MILLER: And don’t discount other precious metals like silver, which
also has industrial uses. Assuming gold takes off, some analysts think
silver could rally about 18 percent to $40 an ounce by midyear.
NEGLIA: I do believe that, if gold takes some legs, you will find some
investors getting into silver as an alternative inflation-fighter
investment, for lack of a better word.
MILLER: So, if he’s right, that gold and silver jewelry you get for
Valentines day won’t just be beautiful to look at. It may also prove to be
a glittering investment. Erika Miller, NIGHTLY BUSINESS REPORT, New York.