By CAROLYN CUI

Gold is proving to be some banks’ silver lining.

Precious-metals trading is typically a small part of banking operations, especially compared to their larger bond and equity desks. But as writedowns, withering trading volumes and limited deal flow have become the norm, any glimmer of revenue helps.

“Throughout my 14-year career in gold, I have never been busier,” UBS AG’s global metals strategist John Reade said on a conference call Friday with clients. He said he’d been “nearly overwhelmed” by inquiries from clients looking to gain exposure to gold.

UBS, HSBC Holdings PLC, and Scotiabank in Canada are among a handful of financial institutions that have maintained a significant bullion business, physically handling gold bars kept behind vaults. Most banks have scaled back or abandoned this line of work, because gold prices were so depressed during the 1980s and 1990s.

While many banks have left the bullion business, others, such as UBS, HSBC and Scotiabank, have recently profited from trading in precious metals. Here, gold bullion of 1,000, 500, 250 and 50 grams.

Banks generally make money selling bullion bars and related financial instruments, while also collecting a small fee for housing actual bullion bars for other investors.

Over the last four months gold has risen nearly 32%, though it fell last week, closing Friday at $929.80 per troy ounce.

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With prices setting new records, the worried wealthy are piling up ingots in home safes. NEWSWEEK goes shopping for precious metal.

A hundred-ounce gold bar, when you hold it in your hand, is surprisingly small and even more surprisingly heavy. It’s somewhat longer and fatter than a Hershey bar, but it weighs six-plus pounds—as much as your old calculus textbook. Its color is unforgettable. Pure gold is gold. It’s not like your wedding ring or your grandmother’s bracelet. It’s a deep, dense yellow, the way the ocean is deep blue, and it sparkles. You can understand at last why the Bible says the streets of heaven are paved with it.

On the day I held the gold bar in my hand, it was worth nearly $100,000. My companion—an established, accomplished, affluent businessman of retirement age—had bought it as a hedge against the sinking Dow and his fear that Obama’s stimulus package will inevitably trigger wild inflation. We had picked it up in the basement of an HSBC bank branch in midtown Manhattan. When I handed it back to him, he put it in his briefcase. We went upstairs, past guards, through metal doors. Out on the street, we said goodbye and I watched him go, a tall, thin man carrying a $100,000 briefcase. He doesn’t want me to tell you his name—or, really, anything about him—because he’s keeping the gold in a safe in his basement. His friends, he says, are doing the same thing. “There is an increase in the number of wise, reasonable, well-read, well-intentioned people who are buying some gold and putting it aside,” says Dennis Gartman, editor of The Gartman Letter, a daily analysis of financial news.

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By GREGORY ZUCKERMAN

Large investors, including some who anticipated troubles for the housing and financial sectors, have been buying gold, concerned that moves by governments to shovel money at problem areas could cripple leading currencies.

Firms such as Eton Park Capital Management LP, Greenlight Capital Inc., Hayman Advisors LP and Paulson & Co. have been ramping up gold exposure in recent months, according to investors in the funds. Blue Ridge Capital Holdings LLC and Highfields Capital Management LP also have been recent buyers, according to public filings about their year-end holdings. Those two firms couldn’t be reached for comment Sunday.

Some of these funds have become among the largest holders of gold exchange-traded funds, such as the SPDR Gold Shares ETF, while also buying gold futures contracts, swaps and even physical bars of the yellow metal.

For years, gold fans often were fast-moving traders and so-called gold bugs, a crowd of bears ever-convinced that the underpinnings of global economies and markets were set to crumble and inflation about to soar. Gold has disappointed some investors because it hasn’t been a home-run investment despite recent financial ills.

The recent purchases of gold by the hedge-fund investors, some of whom have top records, suggests they are coming to share deep worries about the health of global economies and how ongoing problems are being addressed.

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