Jun 14, 2010 (San Jose Mercury News - McClatchy-Tribune News Service via

COMTEX) -- Sinfully seductive, gold almost looks good enough to eat. It shimmers

in bullion. It coos like a songbird perched on her wedding finger. It inspires

melodies and mayhem.

And when the going gets tough, as the going has gotten in financial markets all

over the world these days, gold gets ever more golden. Part inflation hedge,

part emotional touchstone, this most mesmerizing of metals continues its

gravity-defying climb, jumping 300 percent since 2000. At the beginning of June,

it hit an all-time high of $1,254. It then dropped a bit but still has

outperformed stocks, bonds and other commodities this year. As financial markets

around the world creak beneath mountains of debt, everyone from central banks to

individual investors have jumped into gold.

Gary Watkins loves the stuff. In fact, the Campbell, Calif., realtor loves gold

so much that he put pretty much every dollar he had into it a year ago, then

sold it all for a tidy profit last week before it dropped, just so he could turn

around and buy it again.

"I can't believe how much debt this country is in, so I put my money into what I

consider a safe haven," said Watkins, the 58-year-old father of two grown kids.

"I personally think we're going to go bankrupt. I'm not paranoid or a doomsayer

or a survivalist. I'm just a middle-aged guy who looks at the whole picture and

makes my own determination. Gold prices will rise soon, and I'll buy it and ride

it back up."

Watkins is not alone in seeking a safe harbor.

"Gold," said Jason Toussaint with the World Gold Council, "has a 5,000-year

track record of preserving wealth. During times of market crisis there's a

flight to safety, and gold makes a strong candidate for a long-term strategic

asset."

As its price keeps breaking records, and the debate continues over the wisdom of

investing in it, gold remains an exotic money-management tool as well as a

phenomenon subtly woven into all of our lives. Steeped in history ever since

history was first recorded, gold has held up a mirror to the human experience.

It has served as a basis of monetary policy, been worshipped in religious

ceremonies and fulfilled such practical needs as crowns for broken teeth.

"Gold has a set global price at any time, so it's implicit money," said Santa

Clara University economics professor Fred Foldvary. "It's not necessarily used

for transactions, but implicitly it is money. And it's been used that way for

thousands of years."

As a longtime student of gold as well as an investor in it, Foldvary has spent

the past ten years in the classroom sharing his take on this time-honored lynch

pin of financial markets. He can rattle off reasons that nations and individual

investors own gold _ a hedge in times of turmoil and currency declines, a way to

diversify, a financial bird in hand.

To hear Foldvary tell it, gold's past three decades look like a ride on Big

Dipper. "In the '70s, people wanted to hedge inflation with anything tangible,

so they bought real estate and gold, which went up to $850 an ounce. But

starting in the '80s, after the Federal Reserve stopped the expansion of the

money supply and a severe recession set in, the price of gold went down. People

were selling their jewelry, whatever gold they had, and the price collapsed to

around $250 by 2000."

Since then, gold once again has soared, thanks to worldwide financial woes and

the gathering threat of inflation. "Gold is a diversifier and an anchor," said

Palo Alto financial planner Leslie Beck, who has bought gold for her own IRA.

"You buy it because it's a scary time."

Bobby Chopra, a buyer for Cash for Gold San Jose on Winchester Blvd., sees these

financial worries in the eyes of the people who walk into his shop. "I'm just a

guy people bring gold to," he said. But Chopra's customers bring more than gold.

They bring stories.

"People come in here for a million reasons," he said. "Some are short on money,

some have lost their jobs, some are trying to get rid of old jewelry they don't

want anymore. Or it costs too much to fix. Or they've just gotten divorced and

they don't want to look at their husband's ring anymore."

And true to the gold bible, "business has been good because the economy has been

bad. When I started here three years ago it was $550. It's crazy. But the more

it goes up, the riskier it becomes. It's going to collapse next year as the

economy gets better."

Chopra sends the jewelry to his broker in Las Vegas in a curious ritual that

hints at gold's puzzling nature. "He melts it and sends us a check," he said. "I

don't know what he does with it. I ask him, and he says, 'Don't worry about it.'

He says, 'Just do your thing and send me gold. The more the better.' "

But this coveted metal can be fickle. Bella Berlly, a certified financial

planner in Los Altos, warns her clients that prices can fall just as quickly as

they can climb. "When people are emotionally vulnerable and fear-driven in their

investments, buying things like gold can get them in trouble."

Most steer clear, she said, adding that "my clients aren't usually driven by

fear that a cataclysmic event will ensue in the United States." Yet others use

gold as a security blanket in a worrisome world.

Financial planner Beck knows the wide range of emotions driving her fellow gold

investors.

"The only reason I started buying it six years ago was because the prices were

just so low," she said. "I only have about five percent in my IRA. But in early

2009 when things had really blown up, I heard from really smart high-tech

engineers who sold their entire 401(k) accounts, paid the penalty and tax, and

then put the money into gold. That's the kind of fear that's out there. I don't

want to be involved in something that's that fear-driven, but when a commodity

cycle is there, it's crazy to ignore it."

Beck has watched gold prices bounce up and down, and the current growth cycle

still has legs, she said. "When we eventually get inflation, maybe in 2012, gold

will continue to climb all the way into 2017. And then I'd look to sell."

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