(FORTUNE Magazine) – Gold's glamour is back. After a long bear market that drove its price from more than $850 an ounce in 1980 to a low of $284 early in 1985, bullion has bounded ahead more than 60%. The specter of higher inflation -- and thus the promise of further price rises for gold -- has investors lining up to add some glitter to their portfolios. But before you roll your wheelbarrow down to the bullion boutique, take a look at the longer-term returns from owning gold. It's enough to make a goldbug grimace. As the table shows, anyone who bought gold bars on January 1, 1975, the first day American investors could legally own bullion, would have found each dollar he had invested worth just $2.43 on May 1, 1987. That's a hair ahead of inflation. He would have done a tad better even in boring old Treasury bills. But each dollar in common stocks would have bounded to more than $7. To be sure, 12 years is a relatively short time, and there have been periods when gold has outdone stocks. But experts say gold's glory days are the exception and that some of its inherent characteristics portend more poor performance down the road. For starters, gold pays no dividends. That may seem trifling when its price is streaking north, but over the long term it matters a bunch. Since 1926, dividends have accounted for more than one-third of the 12.1% average annual return from owning stocks, according to Ibbotson Associates, a Chicago-based research firm. A further shortcoming of gold: It cannot compound investors' gains as a company can when it retains earnings and uses them to grow. And since gold's value in jewelry and industrial uses is often only a small part of market value, gold is far more vulnerable than most assets to the whims of investor demand. That can lead to protracted bear markets at times when other investments are doing well. Even gold buyers who want a hedge against inflation may get less than they bargain for. True, in the long run gold provides solid protection: An ounce of gold today has roughly the same purchasing power that it did hundreds of years ago. But the vagaries of the gold market make the yellow metal an imperfect insulator against short-term inflationary trends. Since 1980 inflation has reduced the purchasing power of a dollar by 30%. Gold has not only failed to offset that loss, its price has actually fallen nearly 50% in 7 1/2 years. Investors who want an asset that will stay abreast of short-term inflation would do better to stash their cash in T-bills.

Some professionals think gold's real value is as a broad insurance policy against financial or political catastrophe. In Europe, where memories of such calamities remain vivid, gold plays a much bigger role in investors' portfolios than in the U.S. New York-based market economist Peter Bernstein thinks Americans should take similar precautions despite gold's drawbacks. Says Bernstein, who recommends that investors keep up to 5% of their portfolios in gold: ''Sure, gold has a poor return, but so does your investment in collision insurance -- until you smash up the car.'' Gary Brinson, president of First Chicago Investment Advisers, is open to owning gold, but not now. He oversees a novel portfolio whose managers are free to invest in any asset, domestic or foreign. Though Brinson thinks gold may be a good investment for price appreciation from time to time, he does not believe it warrants a permanent place in the portfolio. He will buy gold when he believes that inflation is about to surge abruptly; only then, he says, do the profit opportunities become compelling. Eugene Sherman, formerly at the International Gold Corporation and now chief economist at the Federal Home Loan Bank of New York, has done studies that bear Brinson out. They show that while the price of gold does not correlate well with year-to-year changes in the inflation rate, it correlates closely with frightening upturns in prices. When inflation in major industrial countries was rising toward a 1980 peak of 12.2%, for example, the price of gold more than doubled in just two months. Brinson believes the gold market's recent rally jumped the gun: ''Traditionally, gold rallies in response to inflation. But the recent run- up in gold prices has been in anticipation of much higher inflation.'' The gold market may be sorely disappointed if all it gets is a moderate 5% or 6%, which is what Brinson expects. For gold prices to really roll, he says, inflation would need to break through 8% -- unlikely, given a lethargic economy. Investors who still believe that inflation is about to roar have a variety of gold vehicles to choose from besides actual bullion: -- Gold coins, popular with individual investors. The recent introduction of the American Eagle, the U.S. Mint's entry, makes them even more convenient to buy and own. But be aware that coins command a premium of as much as 8% over the price of bullion. -- Gold certificates issued by banks, representing ownership of gold they hold. Investors don't take physical delivery of the gold, and they can easily leverage their bets by borrowing from the bank against it. -- Shares of gold-mining companies. These offer another route into gold besides buying the metal directly, but -- once again -- not now. Reflecting investor enthusiasm for gold, the mining stocks have run up to dangerously high levels: P/Es are three to four times that of the market. Gold's record as a wealth enhancer is less than lustrous. Even as insurance against inflation, it is very pricey protection.

CHART: NOT AVAILABLE CREDIT: ILLUSTRATIONS BY JOHN PIRMAN SOURCE: IBBOTSON ASSOCIATES CAPTION: Gold's Leaden Luster Since 1975 the returns from gold have been less than precious, falling far short of stocks and failing even to match supersafe Treasury bills. DESCRIPTION: Current worth of 1975 dollar invested in gold, Treasury bills and Standard & Poor's Composite Stock Index.

CHART: NOT AVAILABLE CREDIT: SOURCES: SALOMON BROTHERS, BOND BUYER, DONOGHUE'S MONEY FUND REPORT, COMMODITY EXCHANGE CAPTION: STATE OF THE MARKETS DESCRIPTION: Dow Jones Industrial Average; price-earnings multiple of Standard & Poor's 500-stock index; Treasury bonds; municipal bonds, money market funds; price of gold, 1982-5/28/1987.