Gold has breached £1,000 an ounce, so where is it headed next?
The price of an ounce of the shiny yellow stuff smashed through the $1,600 and £1,000 barriers this week, though the barriers are only psychological -- we'd be using different numbers if we had 8 fingers instead of 10.
But the actual value isn't psychological; it represents a huge amount of wealth that's been taken out of cash and shares, and stashed away in that glittery safe haven from economic woes.
Of course, most of it stems from the ongoing fallout of the banking and economic crises, with fears of further banking insolvencies still very real, and a good number of investors have already pencilled a Greek default into their plans.
And if those things happen, there'll be a lot of headless chickens running round the investment world.
So does that mean gold is likely to head even higher? Well, that may well be the case, even though the stuff has little intrinsic value -- you can't really do anything with it, it doesn't generate new wealth, and it only has value because everyone has decided that it has value.
What the fund managers say
On Wednesday, the Association of Investment Companies issued a press release, outlining what some investment managers are saying about it. Given that those surveyed had holdings in gold, it's perhaps not surprising that they were all somewhat bullish about it, but there are some interesting thoughts.
They are pretty much united in their belief that the aforementioned economic problems are not going to go away any time soon, though there does seem to be quite a strong belief that low interest rates lie behind the attraction of gold.
I'm not sure I see that myself, at least not from a private investor's point of view, as piling into gold when it is at record prices in order to avoid a few years of paltry returns from cash in the bank seems more risky to me than investing in solid dividend-paying shares. But then, it is often when something has already gone through the roof that people seem to think they should buy it.
The experts also think that gold mining shares have some way to go to catch up with the metal itself, though whether Foolish investors, who tend to have a longer view than the latest "catch up with the shiny stuff" memes, will share that opinion is another matter.
Both Catherine Raw from BlackRock World Mining Trust (LSE: BRWM) and Will Smith from City Natural Resources High Yield Trust (LSE: CYN) suggest that rising interest rates could signal the end of the bull run for gold, and they may be right. But that's likely to need some recovery in our economies and improved confidence in business first, and that will surely be the real reason people start selling off the gold and heading back to shares.
What are your thoughts on gold? Do you have any squirreled away? What would tempt you back out again? Please share your thoughts, below.
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