Business: Spreading Rush to Tangibles

In the past twelve months, they have soared like Superman

Gold is not the only game in town. From fine art and oriental carpets to housing in the suburbs and vacation land in the sticks, Americans in record numbers are doing something that they have never done before— bailing out of their own national currency and dashing for inflation hedges wherever they can find them. Like generations of inflation-scarred Europeans, they are parking more and more of their wealth in investments that do not necessarily pay interest but at least prom ise to preserve value in the face of exploding prices.

The rush to collectibles like period furniture, Chinese ceramics and rare postage stamps has been luring wealthy investors for years. But the Price Spiral of '79 has turned the investment binge into a man-in-the-street stampede to tangibles of all sorts. Explains Wall Street Economist Gary Wenglowski:

"For five years no financial asset has yielded a positive return after taxes and inflation. Consumers investing in tangibles are only acting rationally."

In the past year especially, investment in precious metals, gems and real estate has seemed almost too good to be true.

But investors looking to turn a quick profit instead of to protect their capital for the long haul often have not done well at all.

Gold's rise of over 60% during the past twelve months to $385 per oz. has been spectacular, but that goes for its gyrations too. Though investors by the thousands routinely speculate on possible price movements of the yellow metal by buying and selling so-called futures contracts on commodities markets, trading in the actual gold itself is much more limited, and a mere handful of big investors can and do bring about significant changes in price. In just four weeks, gold leaped from $330 per oz. to hit $447, only to lose half that impressive gain by the end of last week. Anyone who plunged in for a quick killing at the wrong moment got badly hurt. Small investors in gold also must pay a sales commission of 6% to 10% when buying the metal from banks, brokers or jewelers. In addition, there is often an equal-sized charge when reselling it.

Other investment metals have been better buys in the past year. Platinum, at $5 10 per oz., has risen by almost 75% since last October. Silver, at $15.92 per oz., has nearly tripled, largely because investors have been buying it as a sort of poor man's bullion.

Precious stones are also being snatched up, though unwary investors can lose disastrously. In the past year, high-grade "investment diamonds" of one carat or more have risen 45% in value and now often sell for $31,000 per stone. But smaller and flawed gems, which are normally sold only for jewelry to hide the imperfections, may be poor buys; four quarter-carat, lesser-quality stones are usually worth much less than a single good-quality, one-carat stone.