Gold looks good, for now

Gold is once again living up to its rich name, though maybe not for long.

The precious metal surged to more than $1,000 an ounce yesterday, driven largely by investor fears about possible inflation in the future, market observers said.

"Jewelry demand is still weak, and industrial demand [for metals such as gold] is still weak. So it is really investment driven," said Ken Gassman, a jewelry industry researcher and consultant based in Hanover County.

Rising prices for gold means that jewelry retailer Capri Jewelers has been seeing more customers looking to sell gold -- everything from necklaces to dental fillings.

"As buyers of gold, we have never seen this type of sustained high prices and feel now is the time if you are planning to sell your gold," said Chris DeCapri, president of the Capri Jewelers chain in the Richmond area.

DeCapri said the stores have been buying gold from customers daily and reselling it to refineries, but he is not expecting the high prices to last.

"I think we will also see a drastic fall in gold prices as soon as some real economic recovery starts," he said.

Investors will often turn to gold as a safe-haven asset when worries flare about an erosion of the U.S. dollar's value.

Those fears have been compounded by government spending to stimulate the economy.

"The price of gold right now, in my opinion, reflects the fear . . . of currencies like the dollar not being sound and secure in the future because of deficit spending," said James A. Cox, managing partner of Harris Financial Group in Colonial Heights.

The gold contract for December delivery traded up $6.50, or 0.7 percent, at $1,003.20 per troy ounce on the New York Mercantile Exchange yesterday.

That is the highest price since March 17, 2008, when worries about the U.S. financial crisis drove gold to a record of $1,033.90.

Gold last went over $1,000 in February.

Cox, however, considers gold futures "a horrible investment" for the average investor.

"It does not do anything. It does not pay a dividend or an interest payment. That nonproductivity is not generally good for most investors," said Cox, who instead recommends investments such as Treasury Inflation-Protected Securities.

DeCapri also warned of the fickle nature of gold as an investment. He said he started buying gold when it reached $800 an ounce in the summer of 1980.

"It only stayed that high for 12 months then fell quickly and stayed well below $400 an ounce for the next 26 years," he said. "Again, now is the time to sell in my opinion."

DeCapri said the high prices for gold have not trickled down to consumers as manufacturers and retailers try to keep retail prices on jewelry low to maintain sales.

"Both the jewelry manufacturers and most jewelers know these are tough times and all are working on low margins to make the consumer happy and able to continue to purchase," he said.

Contact John Reid Blackwell at (804) 775-8123 or .

The Associated Press contributed to this report.