Goldfingers Crossed

"Accursed thirst for gold! what dost thou not compel mortals to do?"
-- The Aeneid

At a time when foreclosures in California can, through the complex process of securitization, set off credit panics on the other side of the globe, there is something simple and reassuring about the ancient investment of gold.

Obviously, many investors feel the same way. Gold prices are near a 28-year high, at more than $740 an ounce, as the dollar slides and as the metal regains some of its traditional appeal as a haven in times of uncertainty.

"When you speak about gold with institutional investors and retail investors, everybody knows what you're talking about," a Paris-based fund manager told Reuters. That may not necessarily be the case when a manager is trying to explain the tranches of a collateralized debt obligation.

With a gold rally, come gold rushes. Or, as in the case today, a stock market gold rush.

Shares of BHP Billiton, the world's biggest mining company, are up nearly 7 percent in trading in New York after the Melbourne Sun-Herald reported that the company would disclose on Wednesday that it has "potentially the largest gold resources in the world" at its Olympic Dam mine in south Australia. The report also gave a boost to markets in Australia and London.

But it also gave virtually no new information. BHP has previously described Olympic Dam, which has the world's largest uranium reserve, as potentially one of the biggest gold deposits in the world. And if the Bre-X scandal a decade ago showed, the days of surprising gold finds belong to a pre-satellite, less global age.

Still, timing is everything. Gold, some argue, has much further to go as the dollar weakens in the wake of the cut in interest rates by the Federal Reserve.

Last week, Goldman Sachs raised its forecast for gold to $775 an ounce in the next three months, from $700. Barclays Capital has a $750 an ounce target. There have even been suggestions of $1,000 gold.

There is a bubble-like quality to this talk of gold climbing to its 1980 high of more than $800 an ounce.

Gold, like other metals, both base and precious, has benefited from the flood of money that hedge funds and other investors have shifted into commodities in recent years. It is quite a trick that gold has now reclaimed its reputation as an alternative to the hot money.

Tradition must still count for something.

Jeffrey Cane

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