Gold ? whether traditional or “black” ? is creating quite a situation for investors.
Though many are describing a “booming” gold market, local financial investors have different feelings on the future of the commodity markets. Historically, gold prices are tied to the oil market. With an ongoing turbulent situation in the Middle East, gold peaked as high as $720 per ounce during May of 2006.
But the precious metal has yet to approach its record of more than $800 per ounce set during the late 1970s, and the direction of the investment seems to be up in the air.
“Gold has done well the past couple of years due to the drop in the dollar and fear of a slowing economy,” said Kirk Kinder, a registered adviser with Picket Fence Financial in Bel Air. “Having gold in a portfolio is like having an insurance policy. When folks get scared, they run to safety, which is usually gold.”
Oil is also a hot topic. Struggling to break $50 per barrel in mid-January, the crude oil commodity market has taken off as problems in the Middle East escalate and summer driving season approaches.
“For the most part, gold is used for jewelry and is stored as bullion, and thus remains in place even once mined refined,” said Matthew Gelfand, president and founder of Bethesda-based MDG Financial Advisors.
However, some feel that while gold may eventually break its all-time mark set nearly 40 years ago, a more consistent seasonal commodity may be the way to go.
“General, less glorious commodities like lead, oil, corn or tin may be better long-term bets than gold,” said Andrew Tignanelli, president of The Financial Consulate in Lutherville.
Whether investors are opting for gold or oil, financial advisers seem to agree that a nice mix of commodities helps people diversify their portfolios.
“So, while commodities in isolation can be risky, they do a great job, but not a perfect job, of diversifying financial risks from other instruments,” Gelfand said.
As of Wednesday, gold was trading for $693.30 an ounce, and a barrel of crude oil was going for $63.
