NEW YORK - A THOUSAND dollars will buy you a laptop, a Caribbean cruise or, these days, an ounce of gold.
The price of gold broke above US$1,000 (S$1,500) on Friday for the first time in almost a year as investors abandoned stocks and other securities seen as more risky.
The soaring price of gold is an indicator of how dire the overall state of the economy is. Investors are shaken by the weakening banking industry and rising unemployment as it becomes increasingly unclear where the bottom is for other investments.
Prices came down from an all-time high set last March as credit markets froze up and traders raced to unwind their positions for cash to cover huge losses. But gold has surged 48 per cent in just the past four months, trading as high as US$1,007.70 an ounce on the New York Mercantile Exchange Friday. And analysts say it will likely break a record as early as next week.
Traders are rushing to gold and the US dollar as a safe haven as the stock market plummets, oil prices sink and interest rates for Treasury bills, notes and bonds slide. On Thursday, the Dow Jones industrials closed at 7,465.95, their lowest level in six years.
'Gold seems to be the asset that has the most potential for price appreciation,' said Carlos Sanchez, an analyst with CPM Group in New York. 'Everyone's waiting to see what happens next, when the economy will begin to pick up, before they invest in other assets.
But there isn't any evidence right now that it will.' Gold has fared better than other commodities, Mr Sanchez said, because of its reputation as a currency substitute rather than a necessity like oil, copper or cotton, which have declined in value over the past year.
Meanwhile, as investors scramble to buy up gold, more of it has become available, according to Jeffrey Nichols, managing director at New York-based American Precious Metals Advisors. Demand for jewelry has evaporated as consumers scoff at the idea of buying luxury items, while a growing secondary market for gold scrap sends low-valued jewelry to refiners to be melted down to gold bars.
But Mr Nichols warns that could contribute to price instability.
'All over the world we're seeing gold in the form of jewelry disappear, and in the short-term that could really contribute to volatility and gold jumping or falling $25 or $50 in a night,' Mr Nichols said. -- AP