Gold still a safe bet

Gold is still a safe bet and part of a good portfolio after prices topped US$1,000 an ounce yesterday.

Thursday, September 10th 2009, 5:02AM 2 Comments

by Paul McBeth

Gold hit an 18-month high this week, hitting US$1,009.70 as concerns about inflation begin to rear their head.

The precious metal has been a favoured haven for investors seeking stability in the face of the worst global recession since World War II, surging some 41% after falling to US$710.30 per ounce last November.

Diversified Investment Strategies brought gold into its portfolios five years ago to act as a counter to a potential meltdown in the global financial system.

“The risk of rising inflation is a factor” that has helped lift the price of gold, said investment analyst Norman Stacey.

“There are also seasonal factors that it jumps up on that we’ve seen over several years.”

The appeal of gold as a safe haven has ebbed as policy makers and central banks around the world have acted to shore up the credit system, but Diversified is still encouraging investors to maintain a model weighting at 10% to gold as it adds valuable diversification and “intrinsic worth.”

NZ Mint bullion deal Michael O’Kane said the metal was still deemed safe by investors, and that the strong kiwi dollar would offer benefits to gold traders.

“A substantial body of analysts is predicting it will go even further as global market volatility continues,” he said.

Paul is a staff writer for Good Returns based in Wellington.

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Comments from our readers

On 10 September 2009 at 11:21 am majella said:

At best right now, gold is a proxy for the faith, or lack of it, in the US currency. The underlying NZD value has hardly changed since gold was USD $850 and the NZ/US cross-rate at $0.48

On 11 September 2009 at 6:05 pm melonista said:

Perhaps Michael O'Kane could explain why a strong NZD would be helpful to gold returns for a kiwi investor? That doesn't make any sense - gold price up, currency up - you lose the gains on the gold because of a loss on the currency...... As majella points out, to a NZ investor there has been little point in owning gold for some time.