On New Year's Day, a reader wrote to this column as follows:

"I take issue with your report in which you (gave) financial advice on what to do with $10,000. You stated: 'Buying three shares, half a bond and an eighth of an ounce of gold would cost more than it earns and your money would never grow.' A typical accountant's study of markets.

"For your information, I took $10,000 from my savings account in 2003 ? which was earning the enormous sum of 1.75 percent per annum ? and put it into physical gold. At $317.75 per ounce. Today, gold is at $516.60 per ounce, and I can liquidate at the click of a mouse, in any currency. There's not much to be said after that," my correspondent concluded.

Well, there are a few things.

First, keep those letters and postcards coming. I didn't know what to write about this week, but now I do: it's gold!

First, though, I should point out that my thoughts as stated were not anti-gold, merely against splitting a relatively small amount of money into a series of even smaller amounts, the increased costs of multiple transactions for small amounts destroying the power of the original investment. I am in this respect a typical accountant.

Gold this week hit a 25-year high, up near $550 the ounce. My correspondent has turned his $10,000 into about $17,000 in less than three years.

Gold is a curious investment. You can own actual gold, in coin or bullion. You can buy shares in gold mines, on the basis that if the price goes up, the price of the company that digs it out of the ground would rise accordingly. You can buy futures, betting on the way the price will go, while not actually owning any gold at all. Each of these techniques has different costs and risks associated with it.

As to ownership, gold is heavy, and any meaningful investment would produce too much gold to wear, no matter how many bracelets you might add to your forearm, or even carry. Buying physical gold beyond a certain level therefore requires you to pay someone to look after it for you. Worse, physical gold pays no interest. Holding costs and any returns must come from the price per ounce, which does not behave in a rational fashion, and has quite some way to go before it catches up to the all-time high, about $850, that it achieved in the very early 1980s.

As gold worked its way up there a quarter of a century ago, a cousin of mine sank the major part of his life savings into the precious metal, at about $500 an ounce. Until the last few weeks, it had earned him nothing in 25 years. I mention this not to insult the gold bugs, but to reinforce the notion that one should not place all one's eggs into one basket.

Gold was once considered a hedge against certain risks in other markets, such as bonds and stocks. The price of gold would go up as the wealthy tried to hedge the jittery performance that affects other markets when instability threatens. When, in the late 1970s, gold became the subject of a price bubble, and a frenzy drove the price almost off the map, it then fell back and has lain dormant, more or less, ever since.

Among the reasons for gold's recent resurgence are: The fear of renascent inflation, at a time when the Federal Reserve has a new chairman; the weakness of the US dollar, against which gold is priced, making buying gold with dollars an attractive proposition; instability in oil prices and the Middle Eastl the end of, or at least a pause in, sales of the yellow metal by the British, Russian and other governments; the final stages of growth in housing markets on both sides of the Atlantic; and a general lack of exciting investment opportunities as North America approaches the inevitable end of an economic cycle that has been artificially lengthened by the Fed's stand on interest rates.

In investing, as in love, timing is everything. My correspondent, wholly tuned in to the gold market and fully up to speed on the research, timed his shot perfectly and got in ahead of the curve.

Once the curve began to be noticed by those less committed to gold, the overdue nature of a gold run-up took hold, and now we're looking at $550, "on the way to $2,000", my correspondent believes.

If he's right, lunch is going to be on him. His $10,000 would be worth $60,000, assuming he holds on for the ride and sells at the right moment, having put his increasing pile of money where his mouth is.

In a way, that proves the original point I made. Here is a fellow who may have timed immaculately what may be the greatest rally in the history of the gold market, and yet if it all goes right, he still ends "only" making $60,000, not enough to buy a yacht, because he "only" sank $10,000 into it.

No matter how well you do, it's hard to become Donald Trump unless you start out with a billion dollars (as Mr. Trump did).

My correspondent very kindly sent me a deep pile of information on the workings of the gold market, which I will digest before commenting. The workings of the market, from a first pass through some of the material, appear to be fraught with all manner of unrevealed machinations. It sounds like a fun read, and if I can make head or tail of it, I'll report back.

Meanwhile, I should say that holding some physical gold where you can find it in a hurry (medium-sized coins, I would think), might stand you in good stead if civilisation ever collapsed and you were shy anything important once the stores were all closed forever. Other than that, my only advice with any investment is to do your homework, and then do it again, just to be sure. What you don't know can bite you.

While there may be gold in them thar hills, you've got to pick the right hills.