Gold: All That Glitters May Not Make Your Fortune

Believers in economic doom have pushed gold past $1,100 an ounce. But the metal has made as many fools as fortunes

By David Von Drehle Monday, May 17, 2010
    • Jeffrey Coolidge / Getty Images

    One particularly grim day in the middle of the financial collapse, as the value of my retirement account plummeted like Wile E. Coyote off a cliff, my brother asked me if I had considered buying gold. Without thinking, I said, "I'm not quite ready to dig a bunker in the backyard." Which was a silly thing to say about a perfectly reasonable investment, one that has appealed to figures as diverse as Cleopatra, King Midas, the Rothschilds and the villain in Goldfinger . On reflection, though, what struck me was that my brother immediately got what I was saying. Gold is an element, it's a commodity, but it is also, for many people, an extreme political statement. When you are no longer willing to buy anything they're telling you to, that's the time to buy gold. Don't hunker down for the apocalypse without it.

    Gold is the color of anxiety, a hedge against fear. Its price tends to soar when times are stormy and crash when the rainbows reappear. Not surprisingly, when the subprime bubble burst in 2007, a 21st century gold fever gripped the U.S. and convulsed the globe, prompting buy orders from kitchen-table investors as well as high-flying traders like David Einhorn of Greenlight Capital. Profits have spiked at gold-mining companies.

    High gold prices — north of $1,100 per ounce, roughly double the pre-crisis price — have pried open jewelry boxes from coast to coast, as would-be sellers decide that the sentimental value of old gifts and bygone bling is no match for quick cash. People have been trading in their rings, bracelets, necklaces and watches at pawnshops, jewelry stores and heavily promoted buying events in the conference rooms of suburban motels. Or you can monetize your memories in the comfort of your own living room, for just as suburban domesticity once begat the Tupperware party, fiscal chaos has now given us the gold party, at which friends gather to have their trinkets assayed by merchants bearing rolls of green. "As long as the price is up, people keep coming," said Bob Jenkins, a Gold Stash for Cash party promoter based in Overland Park, Kans.

    There is nothing arbitrary about the grip of gold on the human imagination. It is an amazing metal. Gold can be pounded into a sheet so thin that light passes through it, yet the sheet doesn't crack. Gold can be stretched into wires thinner than a human hair, yet those wires still conduct electricity beautifully. Implant it in a human body in the form of a medical device, and it will resist the growth of bacteria. Gold is beautiful, pliable, ductile, strong. The Stone Age, Bronze Age and Iron Age all came and went, but gold is forever. Contrast that with, say, collateralized debt obligations, whatever those are, or the concept of collecting insurance on bad investments made by other people — so-called credit-default swaps. In a world of unreal investments, reality must finally have its day, and there is nothing more real than periodic-table element No. 79 — favored shelter from the financial storm.

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