Gold is once again flirting with the $1,000-an-ounce level, as investors leery about the economic rescue plan flocked to "safe haven" investments this week. Gold futures ended the day near $950, the highest level in seven months. Many analysts believe the metal's price will continue its upward climb this year, including Leo Larkin, Standard & Poor's metals and mining analyst.
Larkin's thinking: low interest rates in the near term mean a lower cost for holding gold; meanwhile, increased volatility among currencies means greater demand for bullion: "In addition, we believe that gold production will remain stagnant for the balance of the decade, as old mines become depleted and are not replaced to the extent needed to lift output," according to S&P's The Outlook newsletter.
Still, regular investors should be wary of snatching up gold as a "safe" investment. The thing about gold, says Andrew Lo, Harris & Harris Group Professor at M.I.T. and director of its Laboratory for Financial Engineering, is that it exhibits tremendous volatility at times. The reality is that "investors are taking on a risky asset class...but thinking they're flocking to safety."