Investors rush to gold as value of dollar sags

Imagine being able to travel in time, say back to 1971. What would you do?

Some might be tempted to plunk a hefty bet on the then-Baltimore Colts and grin as you clean up when they defeat the Dallas Cowboys 16-13 in Super Bowl V.

Others might want to see Charles Manson get sentenced or watch Apollo 14 land on the moon. Still others might simply want to warn Bianca not to marry Mick Jagger.

But the shrewd investor would take advantage of then President Richard Nixon’s ending of the gold standard.

At that time, gold was selling at $35 an ounce; last week, it hit a record high of $1,601. That’s a 4,574 percent increase.

“There are those who think that perhaps we’re in a bubble, but I would contend that as long as our government just keeps pumping money into the economy, the value of gold will go up,” said Teresa Mays, owner of the Hedge Co., a gold and stamp dealer at 300 Main St. in Grand Junction.

“And it’s not that gold is high; it’s that the dollar is almost worthless. It’s lost about 90 to 95 percent of its purchasing power since 1900.”

The price of gold increased about $400 over the past year, and it is expected to continue to rise over the next few years, according to some gold futures investment brokers.

In December, the website CommodityOnline published several predictions about the price of gold in 2011, some of which have already come true:

Bullion Research Desk of Commodity Online: “Gold price to hover around $1,500–$1,600 range in 2011. Gold prices will go up in 2011, driven by the fluctuations in the U.S. dollar and other currencies.”

Global commodities guru Jim Rogers: “Gold price would eventually rise above $2,000 an ounce. Gold will be $2,000 certainly in the decade, it’ll probably be much higher. But to me it seems pretty clear that it’ll go to at least $2,000.”

Mays said gold prices would come down only if the dollar’s value increases, something she’s not expecting to happen any time soon.

“Historically, when any fiat currency declines in value, precious metal will go up,” she said. “But if our Congress and our president do something to bolster the dollar and make it desirable again to invest in, then metals will come down. I don’t foresee that they’re going to get their act together, so I’m still bullish on metals.”


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