Gold shines as many see a lackluster economy

Bull markets are supposed to make investors feel good. But the hot market in gold this year has an aura of dread about it.

The yellow metal is nearing a lofty $850 an ounce, a height not seen for almost 28 years.

That has triggered primal fears on Wall Street. If investors are turning back to this ancient form of money, one implication is that they're losing faith in the modern financial system.

Indeed, the higher gold goes, Bill Roberts of Westchester says he can't help but see a deepening message of doom.

The dollar is sinking, banks are reeling from soaring mortgage defaults and the stock market is tumbling anew. With that backdrop, Roberts says he's happy that he has most of his investment portfolio in shares of gold-mining firms.

"I see gold as one of the things that can save a small investor like me," said Roberts, 55, a retired attorney. He believes that the commodity's price could jump above $2,000 an ounce.

Many veteran precious-metal investors, however, prefer not to play the apocalypse card to promote gold these days.

"It brings up the 'gold-bug' image: old guys in threadbare suits, with wild tufts of hair, jingling Krugerrands in their pockets," said Tom Winmill, who heads the New York-based Midas Fund, which owns mining stocks.

Winmill wants the metal to be viewed simply as another element of a diversified investment portfolio -- not a haven during the end times.

Even so, gold's rally in recent months to 1980 levels is bringing back awful memories of that era: galloping inflation, a collapsing dollar and a general mood of despair about America's future.

In New York on Friday, gold ended at $832.50 an ounce, down $2.70 for the day but up $27 for the week. The price is closing in on the record high of $850 set in January 1980.

Adjusted for inflation, however, the price is far from the old peak. It would have to rise to about $2,200 to match it, according to the World Gold Council, a group funded by the mining industry.

Gold has been in a mostly steady uptrend since 2000, when it sold for about $275 an ounce at year's end. Its advance has coincided with a boom in commodity prices overall, as demand for raw materials soars in economies such as China and India.

Rising consumer wealth in those and other emerging markets also has stoked consumption of precious metals. More than two-thirds of gold demand worldwide is for jewelry.