You don’t find too many articles these days warning investors to stay away from gold, but you do see them from time to time as new entrants to the field try their hand at what many others have given up on now that the metal’s price has continued to rise despite their warnings over the last ten years.

If you were warning people not to buy gold when it was $600 or $700 an ounce back in 2005, you could presumably continue to do so as the metal reached $1,000 a few years later (the fall from those lofty levels likely to be all the more painful as they warned) but, at $1,600 an ounce these days, you’d have to think that these writers have long ago given up and now just shake their head at “Old Yeller”, as the metal is referred to over at the Wall Street Journal Market Beat blog.

Anyway, the most recent entrant to the dwindling “warn investors about gold” group was Dan Burrows who, last week, penned Gold $1,600? There’s a Reason They Call It Gold Fever at MoneyWatch.  Some excerpts:

Gold may not be money, as Fed Chief Ben Bernanke said Wednesday, but it continues to be a decent bet, at least on paper, so far this year. Just please don’t let the headlines infect you with yellow fever yourself. Gold, in isolation, is just a form of speculation. And fever, remember, is a symptom of disease.

True, the price of gold is marking new all-time highs thanks to economic uncertainty and political chaos — but not when adjusted for inflation.

As we’ve said before, if gold is considered to be a hedge against inflation, then you’ve got to factor that in. For the record, gold topped out at about $850 an ounce back in 1980. That’s the equivalent of around $2,300 in today’s money. So the yellow metal still has a long ways to go before hitting real (not so-called nominal) record highs.

I know nothing about Mr. Burrows, but it’s as if he just awoke from a long slumber, not yet knowing that, since the gold price reached about $1,300 an ounce,  no one talks about failing to reach the the inflation adjusted high from 1980 as a reason not to like gold.

(more…)

Another 15 tonnes were added to the holdings of the SPDR Gold Trust ETF (NYSE:GLD) earlier today, so, apparently the results of this CNBC poll that began on Friday and now has over 2,000 votes is an accurate reflection of investor mood. But, as an indication of how un-popular the metal still is in the U.S., when I first looked at the results on Friday morning, after it had been up for five or six hours, it only had less than a hundred votes cast…

This comes despite the best efforts by some in the financial media to discourage more gold buying, Jason Zweig in this WSJ story and  Dan Burrows in this MoneyWatch commentary offering their best “earns no interest, not a good inflation hedge” arguments to deter investors. It doesn’t seem to be working.

Of course, as noted in the CNBC story accompanying the poll, it’s not just investors who have been buying the metal lately as central banks around the world have now bought more gold during the first half of 2011 than in all of 2010, a year during which this group went from net sellers to net buyers for the first time in more than two decades.

Apparently, they don’t care that gold doesn’t earn any interest either…

Here’s the most interesting exchange that I’ve come across so far from this morning’s Humphrey Hawkins testimony by Federal Reserve Chief Ben Bernanke before the House Financial Services Committee – Rep. Ron Paul (R-TX) asks about gold.

What do you thing would have happened if Bernanke had said, “The reason that people own gold is because they’re worried about central banks debasing the paper currency – as you know, it’s not really backed by anything…”

As for the answer to the question “Is gold money?”, it hinges on the “unit of exchange” part of the definition of money which, due to its limited use in commerce today, you’d have to say that gold fails. Then again, U.S. dollars come up short in the “store of value” definition…

It looks like it’s going to be another interesting day for precious metals as investors increasingly turn to gold and silver amid escalating troubles with government paper money around the world. Earlier today, the gold price reached a new record high at around $1,578 an ounce and appears to be headed toward $1,600.

After taking out the previous high reached back on May 2nd, there is again no upward resistance for traders to worry about and higher prices are more likely than not. Given the deplorable state of paper money these days, prices might go much higher in short order.

It’s been almost six months since the holdings of the SPDR Gold Shares ETF (NYSE:GLD) have risen by 20 or more tonnes in a single day, but that’s what happened today. As shown below, since George Soros sold most of his GLD holdings earlier in the year, the stockpile of gold bars held by the fund have about flatlined, some 100 tonnes below the peak last year.

During that time, the gold price has risen a couple hundred dollars, implying that the GLD ETF is now a relative bit player in the gold market, wealthy investors and big pension funds alike opting to store their own metal while India and China act like gold magnets for the rest of the world where ETFs are the exception and physical possession is the rule.

Oh well… twenty tonnes is twenty tonnes.