Wall Street Journal

Catching The Gold Bug
The Wall Street Journal

More and more investors are acquiring physical gold, or bullion, in the form of small bars the size of iPhones or coins like American Eagles and South African Krugerrands. Individuals’ bullion purchases almost doubled last year, amid apocalyptic panic over the financial system, to 862 metric tons.

Lately, that panic-driven demand has given way to a more subdued, yet still potent, fear that stocks will suffer as the recession grinds on for a long time, so gold makes sense. At the same time, there’s a rising anxiety about inflation among people like Dr. Van Steyn, resulting from the Obama administration’s massive stimulus spending.

Although gold buying by investors has fallen from it 2008 peak, it is still high. The first quarter’s 130 metric tons is 50% higher than this decade’s average quarterly volume, and analysts say sales for the rest of this year should remain strong.

While gold use for industrial and jewelry purposes is way down because of the recession, robust investor demand has kept prices aloft. In April, when talk of inflation resurfaced, gold prices climbed over $900 per ounce, hitting $983 in early June. It has since drifted down to $909, thanks to such factors as India’s recent doubling of import taxes on gold. For much of the last decade, though, gold has been on a tear, with prices tripling since 2002. Over that time, the Dow Jones Industrial average is down 10%.