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MARKET COMMENT
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Gold surged to $380 an ounce a couple of days ago. That's its highest level for six years. Some people believe that the price of gold could break the $400 level shortly. But is it a good investment at the moment? It is undeniable that anyone who bought gold twelve months ago would be sitting on a capital gain of some 40% today. That certainly would have beaten investing in the stock market. Over that same period the FTSE 100 Index has fallen around 30%. This effect is known as negative correlation. In other words, the stock market and the price of gold tend to, though not always, move in opposite directions. Over the last year gold has also outperformed cash, bonds and even property. However the precise value of gold is difficult to determine and, as always, not all pundits are in complete agreement over the price. There are even some who believe that gold is overvalued at just $20 an ounce. The price of gold today at $380 a pop compares with quite favourably with platinum at a heady $676 an ounce. But there are considerably more uses for platinum than there will ever be for gold. Gold, though, comes into its element in times of uncertainty. That can cause the price of the metal to soar. Though just where exactly the logic lies in seeking succour in a bar of inert yellow metal is unfathomable to me. It is worth bearing in mind that an ounce of gold is still some 50% cheaper than it was thirty years ago. Back in the early seventies when oil was "shocking" global economies, inflation was rife and the only certainty was uncertainty. There is little doubt that uncertainty is back on the agenda again. However holding gold will not make uncertainty any more predictable. Few people seem to have faith in gold as a long-term investment. Many gold bugs take a very short-term view. They will dump the metal almost as quickly as they embraced it in the first place. And heaven help those that are left holding when that time comes. > Gold & Other Precious Metals discussion board