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All that glitters?
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July 11, 1997: 11:13 a.m. ET
Gold has had a miserable year, so this might be the time to buy - or not
From Correspondent John Metaxas
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NEW YORK (CNNfn) - This year hasn't been so good for gold.
First, the Bre-X scandal rocked the gold mining industry. Then this week, massive gold sales by the central bank of Australia helped send the price of gold near a 12-year low.
People are starting to question gold's traditional role as a safe haven. But it's no coincidence that gold prices have melted down just as Wall Street is setting record highs.
With inflation low, financial assets like stocks and bonds become much more attractive than tangible assets like gold.
"The world's central banks have certainly decided U.S. Treasury notes are a better long term investment than gold," Bear Stearns chief economist Wayne Angell said. (100K WAV) or (100K AIFF)
But some say the economic cycle has not been repealed. Good times will not last forever, and gold will have its day.
Yet for now, lower gold prices could force some gold mines out of business, limiting supply and supporting the price.
Some analysts say rising worldwide demand should push gold higher, assuming central banks do not continue their selling. And you can invest without making a pure bet on the price of metal.
"There are companies making money consistently, even at lower gold prices," Smith Barney gold analyst Victor Lazarovici said. "Panic is the last thing you want to do."
Lazarovici likes Newmont Mining and Barrick Gold.
But Robert Stovall, of Stovall 21st Advisers, takes a different approach.
"There are three big U.S. gold mining companies that are issuing convertible preferred stock. I think they maintain a dividend yield of over 7 percent," he said. "Amax Gold, Hecla Mining and Battle Mountain."
One old truism of investing is that your returns are greatest when you invest at the time of maximum pessimism. For gold, that time may be now.
On the other hand, there's an expression that says don't try to catch a falling knife. No one really knows how low gold will fall before it becomes a good investment.
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