Gold Has Shown Its Mettle, but How High Can It Go?

Gold's image may be changing as its price settles in above $1,000 an ounce and continues to set records.

FILE - In this May 13, 2008 file photo, gold standard bars are piled up at the gold smelter company...

FILE - In this May 13, 2008 file photo, gold standard bars are piled up at the gold smelter company Argor-Heraeus in Mendrisio, Switzerland. Some questions about investing in gold are answered as part of an Associated Press column called "Your Money." (AP Photo/Keystone, Karl Mathis, file)

(AP)

The conventional view sees the shiny metal as often-reliable protection in tough economic times and a long-term hedge against inflation and a weakening dollar, since its price tends to rise at the same time.

Lately it's been a lot more. The price has tripled since 2003 and doubled since 2005, trouncing stocks this decade. The Standard & Poor's 500 index, a barometer of the stock market, is down 27 percent since 1999 while gold is up 266 percent. No wonder ads portray gold as hugely profitable.

Should investors still consider buying it now, or is this another bubble that's about to burst? If it's indeed a good time, how do they go about it?

In this installment of "Your Money," we answer questions about the outlook for prices, the best way to hold gold and whether other metals are worth eyeing as well.

If you have a question you want answered, e-mail it to yourmoney(at)ap.org.

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Q: Aren't gold prices likely to decline again as the economy starts to pick up steam?

A: As with stock prices, there's no consensus about where gold is headed.

Some gold-watchers predict a price of $2,000 or higher within the next few years. That's based on the scenario that rapidly rising U.S. government debt will lead to high inflation, sending more investors fleeing into gold to protect their dollars. An improving economy also should help boost demand for gold jewelry.

"It's true we could have a correction after the runup of the last few weeks," says Jeffrey Nichols, managing director of American Precious Metals Advisors in Cortlandt Manor, N.Y. "But looking out over several years, today's prices are still very attractive."

Not everyone's a gold bug, however, especially at these prices.