In a spectacular run up the charts, the price of gold has jumped 55 percent since the first of the year, propelled by a host of factors ranging from economic jitters to calculated raids for bullion by Arabs.
Following another sudden surge last week that sent gold prices hurdling over the $340 mark, an ounce of gold now sells for more than 10 times what it fetched here eight years ago when the United States went off the gold standard.
The rich yellow metal, which has had a magical hold on kings and merchants for centuries, seems hardly to have lost its luster in the modern age. Now as in the past, when the value of all else slips into doubt, the lure of gold remains, its ownership the ultimate measure of wealth.
Never mind that gold is difficult to keep, that most of it once it is mined stays locked away in vaults out of sight, and that when it does appear it serves mainly as decoration. Investors continue to regard bullion as a safe haven, particularly against the world's inflated paper money.
At the same time, investment counselors caution clients against rushing out to buy gold. The bullion market often can be frenzied and irrational, sustaining big drops in price as well as sharp turns upward -- especially when speculators take their profits, as some apparently did at the end of last week. Gold closed at $329.15 an ounce overseas on Friday.
Part of the blame for the current run was placed on the Dresdner Bank of West Germany, long known to represent Middle Eastern financial interests. The bank bought nearly all of the gold -- 1.4 million out of 1.5 million ounces -- offered by the U.S. Treasury in July and August. The purchase, it was rumored, was made for Arab clients trying to hedge their petrodollars with something whose value is more assured.
It also is thought that representatives of the Organization of Petroleum Exporting Countries and perhaps some far Eastern investors were behind the record demand for gold auctioned by the International Monetary Fund last week. The IMF reported bids totaling 1.65 million ounces for the 444,000 ounces of gold up for sale, a lopsided market that drove up the price.
French economic analyst Rene Sedillot named wealthy Arabs as those chiefly responsible for the current gold rush. "It is through them that black gold is being converted into yellow gold," he said.
Hans Schreiber, a member of the board of directors of the Dresdner Bank, denied in a telephone interview that the bulk of the bank's recent gold purchases had been for Middle Eastern clients. He said that "over two thirds" was for buyers from other regions, but he added that the ability and willingness of Arab clients to buy bullion should not be overestimated.
In fact, the feverish buying by banks such as Dresdner and their clients was little more than a detenator for a market prepared to explode in any case. Demand for gold has been up in recent months, reflecting all sorts of uncertainities: of a recession in the United States, the political fortunes of Jimmy Carter, stability in the Middle East, the strength of the dollar and inflation worldwide.
Small investors as well as large ones have been turning to the yellow metal -- buying up gold South African Krugerrand coins in London, hoarding gold Napoleon coins in Paris, and in America, collecting practically anything that has a touch of gold in it, from dust and bars to commodity future contracts.
Last week Canada entered the world's bullion markets, introducing a new gold coin called the Maple Leaf.
The main attraction behind the buying was not so much the traditional hedge against inflation as what one New York dealer called "an investment against despair." The demand for gold has become an anxiety barometer reflecting investor outlook on the condition of the world. As such, it is difficult to justify gold prices on economic grounds alone.
"We're seeing something beyond the economics of the metal," said a Swiss gold trader. The Dresdner Bank's Schreiber said gold prices have "moved up too fast," and he called the current market "irregular and overheated."
Donald Adams, a gold watcher at the U.S. Federal Reserve, agreed. "I think it's pretty irrational," he said, "and has gotten out of line with what with price should be."
Complicating matters and helping to incite the panic has been a drop in world gold supply. Much of the gold that everyone talks about comes from South Africa, where 400,000 blacks supervised by 36,000 whites work in 42 mines. South African production peaked in 1970 at 1,000 tons a year. In recent years, South Africa has maintained its annual gold production rate and no significant decrease is expected this year.
The squeeze this year has come from the Soviet Union, the world's second largest gold supplier. Soviet gold sales, which last year were running at a record annual level of 450 tons, are expected to fall to about 300 tons.
Speculation about the decrease is that Soviet production has dropped despite recently added capacity. Another explanation offered is that Moscow intentionally has sought to boost the price of gold.
In the past the Soviets have sold gold in order to raise Western currency to buy grain and hardware. With the Soviets reportedly again in need of wheat, there is speculation they soon may offer large amounts of gold. That would draw gold prices down.
The U.S. Treasury compounded the world's supply problem in April by cutting its monthly bullion sales in half, from 1.5 million to 750,000 ounces. Rumors that the United States was preparing again to reduce sales contributed to last week's gold fever.
Treasury Secretary G. William Miller sought to dispel such talk by saying there would be no cut.
Some very limited new supplies may be on the way from a prospecting revival in Colorado and elsewhere in the American West that is giving new life to old gold-rush mines. There have been similar reports of a revived interest in gold panning by villagers in India.
Once it has been mined and refined, most of the world's new gold goes to the markets of London and Zurich. Each business day in London, at 10:30 a.m. and 3 p.m., representatives of four London bullion dealers gather at the office of a fifth, N. M. Rothschild & Sons, to fix the price of gold.
There the dealers agree on a price that for the next few hours serves as a worldwide reference point for active traders to use.
More than 10,000 tons of gold are bought and sold each year on the London and Zurich markets.That is roughly eight times annual world production.
Industrial demand for jewelry, electronics and dentistry absorbs about 1,000 tons of newly produced gold a year. The rest is traded in numerous transactions among speculators and investors. Few actual deliveries occur in connection with these deals. The gold is shuttled about in bank vaults as its titles changes hands.
A new dimension was added to the market in 1974 when gold trading in the United States became legal after four decades of prohibition. While in Europe and Hong Kong most of the trading is for cash, in the United States about 90 percent of gold action is in futures trading on commodity exchanges in New York and Chicago.
A futures contract is an agreement to buy or sell a commodity at a specific price at some fixed time. European traders complain that U.S. gold futures have done much to unsettle the world market because of their largely speculative nature.
Action in gold futures was especially feverish last week. In the Chicago market, the volume of gold futures contracts climbed to more than 31,000, the most since the market was established five years ago. Moreover, contracts for gold delivery next March was selling for $347.50 and ounce, reflecting speculation that bullion prices would continue to rise.
U.S. officials say they are not worried by the latest surge in gold prices. In part, that is because unlike past rushes, this one does not mirror a weakening of the dollar.
It had been axiomatic that as the price of gold went up, the value of the dollar would drop. But lately, it has been predominately West German marks, Swiss francs and Japanese yen being traded for gold, indicating a general nervousness about leading economies.
Where the current panic will push gold prices is anyone's guess. The predictions of gold analysts last week varied, with a few even forecasting the yellow metal would break the $400 mark by the end of the year.
In 1971, the United States was determined to take the myth out of gold and phase it out as a key world currency. Until then, the United States had pegged the price of Bullion to the price of the dollar at $35 an ounce.
By untying it from the dollar and cutting gold prices loose, it was hoped the yellow metal would be relegated to the inglorious status of just another commodity.
It has not been. Many of those with money have been more reluctant to surrender belief in what for numberless generations was the unchanging, enduring standard.
Though it generally is agreed in international monetary circles that the world will not return to a gold standard, the popularity of the metal as a golden anchor appears undimmed -- mostly decause no one has come up with a very satisfactory alternative.