September 17, 2003
Gold Prices Go Over $380
Usually when the stock market rises, the price of gold falls. But that's not happening this time around, report gold analysts. The Dow Jones Industrial Average is up 19% since the end of March, while the price of gold is up 14% during the same period. Gold prices topped $380 last week and have surged almost 50% from their 2001 lows, according to the Wall St. Journal. Some observers think the gold price could eventually go to $400 an ounce.
Analysts say that continued lack of trust in the stock market's rise, plus a shaky dollar, have combined to help gold regain its status as a reasonable investment - not just a niche one, according to WSJ. Previously, it was seen only as a haven during times of high inflation. Barron's columnist Michael Santoli believes part of the run-up in gold's price is because America's trading partners are fighting to keep their currencies weaker against the dollar. "The default beneficiary is gold, notwithstanding slurs that it's an anachronism, the object of vestigial nostalgia for its historical status as a store of value," says Santoli.
Santoli also reports that shares of Newmont Mining, the largest U.S. gold producer with the biggest stock-market capitalization, are up more than 30% this year to around 40, and have tripled since late 2000. He says Newmont is viewed as a pure equity proxy for gold prices, and is among the few stocks large enough for institutions to play. Traditionally, individuals also play the gold market by investing in mining company stocks.
A renewed interest in gold mining stocks by U.S. investors has also spurred ten small and midsized Canadian gold producers to be listed on the American Stock Exchange in the last year, reports The New York Times. One of them, Northgate Exploration, told the Times that overall trading volumes in its stock have more than doubled since it was listed on July 11.
The World Gold Council is also awaiting approval from the Securities and Exchange Commission for Equity Gold Trust, a new exchange-traded fund backed by gold bullion, according to the Times. A similar fund, Central Gold Trust, was set up this summer on the Toronto Stock Exchange by a Canadian group with significant participation from American investors. All this news points to ongoing general bullishness about the price of gold among institutions and investors.
by Peggy Jo Donahue