The performance of gold has been remarkably constant in 1991: It's been pitiful no matter which international calamity was supposed to send its price skyward at any given time. After briefly hitting $400 an ounce as the Persian Gulf War began, gold rapidly slipped away again, remaining around the mid-$300 range despite the recent Soviet coup.
Whenever investors around the globe get nervous, they're instead turning to U.S. dollar-denominated assets. The safety of interest-paying government securities such as U.S. Treasury bonds has stolen the traditional glitter of gold. Furthermore, there's little demand for this historic hedge against inflation when inflation is so low.
"Gold has flat-lined so much the past few years that it has virtually become an 'unprecious' metal," said Alan Posnick, senior vice president with New York-based MTB Banking Corp. "Yet, even though we've been lulled to sleep by its performance, I'd hold rather than sell, because it isn't likely to go much lower."
Investors in gold coins have done poorly the past 10 years. And, despite good sales in January, sales of the American Gold Eagle coin have since ground to a virtual halt, Posnick notes.
Too many investors expect gold to blast through the roof whenever world events are bad, and that is simply an unrealistic expectation, say the experts.
"On the positive side, gold was a hedge of sorts when the Soviet coup occurred, for its value did stay steady while many financial instruments fell," said John Phizackerley, analyst with Shearson Lehman Brothers. "However, the only factors that I really expect would make gold prices move up dramatically would be a weaker dollar or a stock-market turnaround."
For those contemplating buying gold, a lot of the risk has been removed.
"We've finally reached a point where all the bad news now seems to be in the gold market, so this may well be the bottom," said Walter Perschke, chairman of Chicago-based Numisco Rare Coins.
Gold-mining stocks have performed better than the metal itself, particularly stocks of companies which have rapidly rising production and are therefore more immune to gold prices.
Top-performing gold mutual funds in 1991, according to the Mutual Fund Values investment service, are:
Keystone Precious Metal Holdings, Boston; $124 million in assets; no front-end "load" (initial sales charge), but instead a deferred sales charge; $1,000 minimum initial investment; up 10.58 percent.
Franklin Gold Fund, San Mateo, Calif.; $277 million in assets; 4 percent "load"; $100 minimum initial investment; up 10.37 percent.
International Investors Fund, New York; $579 million in assets; 8.5 percent load; $1,000 minimum initial investment; up 9.51 percent.
Vanguard Specialized Gold and Precious Metals Fund, Valley Forge, Pa.; $170 million in assets; no "load," but 1 percent redemption fee; $3,000 minimum initial investment; up 9.37 percent.
United Gold & Government Fund, Shawnee Mission, Kan.; $45 (( million in assets; 8.5 percent load; $500 minimum initial investment; up 7.39 percent.