In nervous economic times, Americans have gold fever

They caught it big time last fall, when the financial system teetered and the recession seemed to flirt with tipping into depression.

The fever drove the price of the hot metal above $900 an ounce, double what it was in 2005.

This summer, with fears of big government and worries about inflation, the gold market showed no signs of cooling.

Even the unknown drives our desire for gold.

Paul Munyan likes to speculate in gold mining stocks. But he bought South African gold coins called Krugerrands some time ago and stashed them away.

"The coins really are just a hedge against the unthinkable, which is something really, really, really bad," said Munyan, a lawyer in the Kansas City, Mo., area. "Gold is one of the ultimate safety hedges for your money."

The U.S. Mint reports that sales this year of American Eagle gold coins topped three-quarters of a million through July, almost as many as all of last year. The mint twice suspended American Eagle sales last fall when it couldn't keep up with surging demand and soaring prices.

Investors are throwing money at exchange-traded gold funds, too.

The biggest of these relatively young investment vehicles has taken in $10.4 billion worldwide this year, compared with $4.3 billion during all of 2008.

Within the United States, investment demand for gold jumped nearly fivefold, reaching 97.6 metric tons during the 12 months that ended March 31, which is about the time the stock market hit bottom.

Nevada mines produced $5.7 million ounces of gold last year, or 78 percent of the entire production in the United States.

If Nevada were a country, it would rank fourth behind South Africa, China and Australia in gold production.

Doug Driesner, an official with the Nevada Division of Minerals, said gold has been a good way to store wealth throughout history because it tends to rise in value over the long period.

Some economists have been predicting $2,000 per ounce, while others say it will lose value in coming months.

"A lot of the predictions are hinged on the fear of inflation," Driesner said. "But I don't know who to believe. The weatherman might be a better predictor than economists."

The price of gold fell $10.90 an ounce to $942.30 per ounce Monday on New York markets. Officials attributed the decline to an increase in the value of the dollar.

But even as Americans feverishly buy gold, they're selling it, too, mainly to raise some extra cash.

Consumers' penchant for cashing in unwanted jewelry helped Jeremy Holley save his house.

Holley said he was on the verge of foreclosure last year when he got into the cash-for-gold business with a partner to form Kansas City, Mo.-based Augustus Gold and Silver. The company joined a sea of others asking consumers to mail in their old jewelry for scrap-gold payouts.

Local gold dealers said recent and longtime buyers of coins and bars were not necessarily hoping gold prices would go up. They see the yellow metal as a hedge against economic disaster and even social breakdown.

Gold's broader appeal certainly stems -- at least partly -- from its spectacular price climb. Prices in the spot market are roughly 270 percent higher than a decade ago, with about half of that coming since the start of 2005.

Contrast that with an equal investment in the Dow Jones industrial average back in August 1999.

Without dividends from their 30 blue-chip stocks, Dow investors would have lost money. Even with dividends, something gold doesn't pay, the Dow has returned only a 9.3 percent gain, which amounts to less than 1 percent per year over a decade.

Stocks of gold mining companies have done better than other companies' shares, buoyed by the value of their precious product.

Review-Journal Capital Bureau Chief Ed Vogel contributed to this report.