Will Gold Keep Glittering as an Investment?

Nothing inspires a gold rush quite like, well, gold. Since July the precious metal has spiked to more than $1,300 an ounce—a rally on top of a longer rally dating to 2002, when the price was below $300. The dizzying rise has some investors sensing a bubble about to pop—and with one company set to distribute gold-dispensing ATMs in the United States, such apprehension seems warranted.

The gold craze, though, may not be over. "Gold up to $1,300 is a rise that's tantalizing, but is risky. We think it has further to run," says Paul Christopher, a Wells Fargo strategist. The firm's reasoning: as stocks and bonds give middling returns, and yields from ultrasafe investments like T-bills remain low compared with inflation, gold will keep its luster. Second, the Fed's Aug. 27 endorsement of a policy that would put more dollars into circulation bodes well for gold, traditionally a hedge against inflation. Investors who want in, but don't want to own ingots, have other options, like ETFs that trade throughout the day; buying shares of mining companies; or exploring metals that correlate with the price of gold, like platinum and palladium. Other analysts are wary. Vanguard's Chris Philips sees the huge interest from casual investors as a classic red flag—and further warns that gold ETFs may have gotten too big, creating conditions for a fall as rapid as the rise. Finally, if gold is a good bet for inflationary times, its performance in the low-growth years since 2002 doesn't add up. Still have an urge to buy? There's always a necklace.