Gold Boom: Wary of Markets, Retirement Savers Seek Hope in Gold

May 17, 2010 — -- Tommy Griffiths hosted a popular radio show in Virginia Beach for twenty years.

During the boom he watched his house soar in value and his retirement savings grow. But when the economy crashed, Griffiths, 49, lost his job and had to tap his 401K to keep up with the bills.

Now, he has figured out a better way to save for his retirement nest-egg: he's trading gold.

Griffiths, who is married with one son, is reluctant to say how much in profit he has made so far, but says it's enough to cover his needs.

"I took a risk and it worked out," says Griffiths, who buys and sells gold bullion on eBay."I'm going to be a little more wary of investing in a 401K and I'm absolutely keeping an eye on gold."

Gold Gains Sparks Activity

The price of gold set another record high this month, hitting $1,249.70 per ounce at one point on May 6. It's a far cry from the lows of 1999, when an ounce cost less than $300.

The boom has fueled all kinds of business activity, from "gold parties" at which friends sell their unwanted baubles to professional gold buyers, all the way to amateur gold trading, such as that practiced by Griffiths.

But there has also been a surge in average investors -- including retirees and those saving for retirement -- who are loading up on gold as a way to hedge against inflation and stock and bond market fluctuations.

"Retail investors are buying gold through the ETF (Exchange-Traded Fund) and through ordinary coins and small bars," says Jim Steel, commodities analyst at HSBC Securities. He points out that gold ETFs are particularly popular, since they allow investors to buy a share in actual gold bullion, without having to deal with the hassle of storage and insurance.

However, some experts warn against relying too heavily on gold as an investment, pointing out that its fluctuations are unpredictable and that it usually only gains value when everything else sinks.

At the same time, because of its appeal as an "investment of last resort," gold is very vulnerable to the sharp ups and downs caused by speculators, says Jon Nadler, senior analyst at KITCO Metal, a Canadian retailer of precious metals.