Gold, Again, Becomes a Shield Against the Unknown

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Gold is “an asset that people want to own as protection for risks they can’t really analyze and get their arms around,” said Mr. Schweitzer at JPMorgan. “That risk has gone up.”

Gold is supposed to be a destination for scared money, but as the credit crunch intensified last month, this presumed haven lost value along with many other assets. Only after the worst of the crisis had passed did traders return to gold, sending its price sharply higher.

The metal has gained about $80 an ounce, or 12 percent, since mid-August, around the time the stock market reached a trough. While share prices have since had ups and downs, gold’s ascent has been nearly uninterrupted.

This strength heralds further gains for physical gold and for shares of mining companies, many analysts and fund managers predict. They offer a variety of reasons, ranging from a desire to hedge against a falling dollar, a weaker economy or geopolitical instability, to a conventional, Econ 101 imbalance of supply and demand.

The bullish consensus, and the abundance of factors invoked in reaching it, result from an oddity of the gold market: it thrives on uncertainty, and investors, even authorities on commodities, are uncertain what makes it tick...

Gold is “an asset that people want to own as protection for risks they can’t really analyze and get their arms around,” said Mr. Schweitzer at JPMorgan. “That risk has gone up.”

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