Transcripts

Investors Take A Shine To Gold

SUZANNE PRATT: It was a record week in the commodities markets. Not only did oil prices close above $100 a barrel for the first time, but gold is now closing in on a record $1,000 an ounce. April gold futures at the New York Mercantile Exchange slipped $1.40 an ounce today to just under $948, but they still gained nearly 5 percent this week and many experts believe there's still good value in the yellow metal.

In the last seven years, gold prices have more than tripled. Supply/demand fundamentals, coupled with the economic environment in the U.S., have been behind the stunning climb. Some gold bugs believe prices will peak over $1,000 an ounce this year. Gold trader Paul Sacks says, despite the soaring price tag, investment interest is in no way dwindling. He says the market is in uncharted territory.

PAUL SACKS, INDEPENDENT GOLD TRADER: There's a lot of people coming in to buy gold for all sorts of reasons. There's a lot of interest in the options in the 1,100 strike, the 1,200 strike, even as high as the 1,500 strike. So that corresponds to gold trading at a price of $1,500 an ounce.

PRATT: Since 2003, gold prices have increased an incredible $100 an ounce each year. The precious metal is now trading about $50 shy of a four-digit price point. Early on in the price run up, global demand exploded as China and India became big buyers. Petrodollars from the Middle East were also a factor. Meanwhile, supplies of the yellow metal began to dwindle. More recently, gold has recaptured its status as a safe haven investment; that's as concerns about a recession in the U.S. grow, inflationary pressures escalate and the U.S. dollar remains extremely weak. On top of that, experts say sub-prime mortgage problems and the accompanying credit crisis have resulted in increased gold investment by funds seeking alternative asset classes. HSBC analyst Jim Steel also points out that gold and oil prices have recently been joined at the hip.

JAMES STEEL, METALS ANALYST, HSBC: The correlation between gold and oil since the year 2000 has been about .91. It's very high; that is to say that when oil moves, gold tends to move lockstep with it. And we've seen, of course, that oil has gotten to $100 a barrel and in fact, overall, the commodity markets have been very healthy.

PRATT: Steele believes gold prices will continue to trade higher in the short-term; that's as long as the Federal Reserve continues to cut interest rates.