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By Jennifer Yousfi
Gold reached a new all-time high on Friday, as prices for an ounce of gold gained $6.50 to $900.10 in early trading for February delivery on the New York Mercantile Exchange.
"It's a reflection of market sentiment: Gold is a hedge against uncertainty and right now it's the best bet," Carlos Sanchez, a precious metals analyst at New York-based CPM Group told Forbes. "None of the other investment options look that great and gold does."
Analysts feel the price jump was fueled in part by Federal Reserve Chairman Ben S. Bernanke's recent comments that the Fed stood ready to take further action if needed, spurring speculation of a 50 basis point rate cut at the next Federal Open Market Committee meeting at the end of this month.
"We are not talking about $900 now. We are talking about $1,000," Ronald Leung, director of Hong Kong-based Lee Cheong Gold Dealers, told Reuters. "Of course sentiment is really bullish, but I think the more bullish the market is, the more dangerous it is," he added.
Even though economic conditions for 2008 are expected to closely resemble those of 2007, when gold returned more than 30%, investors should never see gold as an investment that can only rise in price. Viewed as a hedge, and purchased at the right time, gold will provide a sound addition to many investment portfolios. And if the yellow metal also manages to produce massive gains, even better.
That said, though, there are gold investments out there that combine safety and performance.
The StreetTracks Gold ETF (GLD) offers bullion-based pricing without the storage problems and liability of delivery.
Shares prices of Toronto-based gold-mining company Barrick Gold Corp. (ABX) - the biggest gold producer in the world - performed about in line with gold itself during 2007. But be wary of mining companies. They face the same inflationary pressures that everybody else does. And gold bugs aren't inherently risk takers.
For gains most accurately - and safely - tied to gold's value, another possibility worth a look is a pooled precious metals account, where you can buy gold and silver for as low as 1% above market price, but storage and maintenance fees are lowered by spreading the cost out amongst a pool of investors.
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