Fear factor driving gold higher
“Gold is not an investment. It doesn’t pay you interest and it doesn’t increase wealth,” complained one investment advisor recently as he perused exploding client demand for the yellow metal.
“It’s just a cautious asset for scared investors,” he grumbled as he waved a chart showing prices had once again hit an all-time high.
Some anecdotal evidence suggests he may have a point.
Bankers at this week’s Reuters Private Banking Summit said investors were loading up on gold to the tune of some 7 to 10 percent of their portfolios.
The traditional motive of hedging against inflation was conspicuous by its absence.
The wealthy were buying gold because they were worried by the possibility of deflation, by a collapsing dollar or by the threat of prolonged financial turmoil.
Many were getting exposure through gold-backed exchange traded funds or gold stocks related stocks.
And one couple even bought a tonne of the stuff and drove off with it.
“If we did have a global financial meltdown, what do these people think they could actually do with the gold,” said the investment advisor.
As for the pair with a tonne of gold — worth well over $40 million at current prices — let’s hope they hid it somewhere safe.