Economist on The Rise of Gold

I think gold is a good investment, now I also think you would be crazy to make it your only investment and I am very happy to keep my mutual fund. The question is why has gold risen lately. Economic fears coupled with inflationary concerns have led to retail demand increase by 5 times what it was last year. To be clear we are talking about actual gold bullion that you could keep in your home and not invests in ETF's (exchange traded funds) which track the price of gold. I suppose that makes sense, if you were hoarding gold you would want it in the basement, not a paper certificate.

The heyday for buying physical gold was in the early 1980s, when bullion reached its peak in real terms. Once again, business is picking up. According to the World Gold Council, retail demand for bullion in the fourth quarter of 2008 was almost five times what it was in the same period of 2007. Dealers report a surge in interest from those worried about the safety of banks or simply the lack of attractive alternatives to negligible deposit rates and volatile stockmarkets. Fanning such fears are those who argue that today’s financial crisis does not so much resemble the Depression of the 1930s as the hyperinflationary Weimar era of 1923.

Sandra Conway of ATS Bullion, which operates out of discreet offices in central London, says there was a big rush after the demise of Lehman Brothers in September. “People want something tangible in their hands as a safeguard,” she says. One ATS client saves up all his £2 coins ($2.90) until he has enough to buy a sovereign, a gold coin minted by the British government. But coins tend to attract a markup, based on both scarcity value and the cost of manufacture; according to Ms Conway, Krugerrands trade at about 13% above the spot price.

5 year rise

If gold coins are not your fancy, you can buy gold bars which go for a whopping 20,000 pounds, roughly 35,000 dollars. Anyway you look at it the investment has paid off :

Whether true or not, old-fashioned coins have been a shrewd bet so far. Ms Conway points out that Krugerrands bought for £200 or so in 2005 are now worth more than £700.

Some of the comments on the article made valid points, why stockpile gold? What would you do with it buy food? If that's the case just plant a garden.