|Terrorist Attacks Drive Investors to Safety of Gold,
By Bobby White
Capital News Service
Monday, Sept. 17, 2001
ANNAPOLIS - Maryland gold dealers have been swamped with orders to buy
gold coins and bars by nervous investors reacting to fears of a U.S.
economic downturn as a result of last week's terrorist acts.
"I have seen a dramatic increase over the past two days of people
buying gold and silver," said Bob Carlson, manager of Gaithersburg Coin
Exchange. "People who don't even know what gold is all about have come
Investors are scared and looking for a place to "park their money,"
The worth of gold has increased from Sept. 7 by $15,
with an ounce now selling for $280. While the increase is not dramatic,
it is substantial considering gold is a conservative asset, Carlson said.
Since 1990, the price of gold has been in a slow but steady decline,
with jagged upswings during the Persian Gulf war, said Jim Schaeffer, who
operates Golden Eagle Coin Exchange in Laurel.
A month ago, the price was $250 an ounce. Over the years, gold has
been marginalized, with progress being the chief culprit. Technology now
allows for a more open, flexible world economic system. Investors can
easily own assets in many countries and not have to rely on gold to store
Before Tuesday, Schaeffer said he'd sell a customer maybe one or two
Since then, "people have been coming in and asking for five, six or
even seven ounces of gold," said Schaeffer, who has been in the market
for 18 years.
U.S. Treasury Bonds also are in high demand in the wake of the twin terrorist attacks on the Pentagon in Washington and the World Trade Center
in New York.
"People want that security," said Peter Locke, George Washington University finance professor.
The flow of funds from riskier to safer investments is called "flight
to quality," Locke said, and it historically occurs in times of crises.
Investors usually opt for bonds because they pay interest annually, whereas gold does not. People also decide on bonds because they are
considered a safe investment with a respectable return.
The attraction to
gold is its high liquidity.
"If it all went to hell, gold is something you can trade," said
The bond market re-opened Thursday after shutting down following
Tuesday's attacks. A number of investors plunked their money into
short-term government bonds. The decision drove bond interest rates down
to 3 percent.
Gold dealers predict the price
of gold may climb higher because of the uncertainties surrounding the
"Whenever there is a weak dollar, the price of gold remains strong,"
said Michael Merrill, who sells coins in Timonium, Md., and has recently seen
brisk sales. "We have a while to go" before the U.S. economy gets
Merrill said in the early 1980s when inflation was as high as 12
percent, gold was selling for $850 an ounce. During the stock market
crash of 1987, people grabbed what was left of their money and
temporarily parked it in gold.
The success of the stock market the past
few years has meant the focus on gold had somewhat subsided, said
"I wish it was [because of] better circumstances people were revisiting it."
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