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Money Managers Choose Gold Over Cash

Release Date: 
Wednesday, October 31, 2012

The price of gold moved higher on Wednesday on  as stronger-than-expected retail sales in Germany and upbeat consumer-spending data in France boosted the euro against the dollar. Gold was $10.00 higher at 7:35 a.m. Pacific Time on the New York Spot Market, trading at $1,720.00 per ounce. Spot silver was $.47 higher, trading at $32.32 per ounce. (Click here for the most current spot prices.)

"Gold is up today due to the firmer euro, weaker dollar and firmer European equity markets," Commerzbank analyst Daniel Briesemann said.

"It's the right time for gold," agreed Jamie Carrasco, an investment advisor with Macquarie Private Wealth. Carrasco treats gold as cash, holding the cash portion of his portfolio in gold rather than the U.S. dollar, which he believes is losing value with the Federal Reserve's quantitative easing program. "In an environment where paper is getting devalued, it makes a lot of sense to own gold as cash," Carrasco said. "I'm just protecting my purchasing power."  Carrasco added that people shouldn't worry about how high the price will go. "Gold isn't moving," he says. "Currencies are declining."

Pierre Lassonde, chairman of mining company Franco-Nevada, noted the reemergence of emerging markets central banks as net gold buyers, as they have been "relearning that all paper currencies are suspect."  Today, "cash is trash," he said, with the value of euro, dollar and yen in question.

Stephen Lingard, managing director of Franklin Templeton Multi-Asset Strategies, said that with continued deficit problems in Europe and the U.S. and a threat of a Chinese slowdown, gold may rise. "Gold is a great hedge in this environment and that's why we've seen such strong performance over the last few years," he said. Lingard said investors should consider placing up to 10% of an investment portfolio in the metal.

(Sources: "PRECIOUS-Gold firms with stocks, still headed for monthly drop," Reuters, October 31, 2012 "The best way to buy gold," MSN Money, October 29, 2012; "Don't Fear a Normal Gold Correction," International Business Times, October 29, 2012)

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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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