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RBS' Coutts Says Investors Should Double Gold Holdings

Release Date: 
Wednesday, October 10, 2012

Gold moved lower on a stronger euro although concerns for the common currency zone persist.  Gold was $1.60 lower at 7:13 a.m. Pacific Time on the New York Spot Market, trading at $1,763.30 per ounce.  Spot silver was $.14 higher, trading at $34.14 per ounce.  (Click here for the most current spot prices.)

Commerzbank analysts see ultra-loose central bank monetary policy, increased fears of reduced purchasing power and currency devaluation supporting gold prices.  The euro-zone crisis is a dominant theme as well, with Spain thus far refusing to seek help and the International Monetary Fund raising concerns about ongoing capital flight from euro-zone peripheral countries.  “Against this backdrop, the gold price remains well supported,” Commerzbank said.

"In the short term foreign exchange movements are what is moving gold. It's difficult to know whether it's dollar strength or euro weakness, but in the markets there is still clearly concern about what might happen to the euro," said David Jollie of Mitsui Precious Metals.

Coutts, the private banking arm of the Royal Bank of Scotland, believes investors should double the amount of gold they hold as the value of paper currency diminishes along with the prospects for global economic growth.  Ideally, investors should aim to have 7 to 8 percent of their assets in gold, above the wealth management industry's average of 3 percent, said Gary Dugan, Coutts chief investment officer for Asia and Middle East.

"What's happening in precious metals is that they are becoming more mainstream," Dugan said, adding that ten years ago investors rarely held any gold in their portfolios.  "Some of the clients ask where gold prices are going, and I say don't even think about prices. It's a store of value...We are going back to normality, and the normality is that precious metals are the core part of your portfolio...".

Dugan's price outlook suggests gold may rise towards $2,000 in the next several months, supported by short to medium-term factors including purchases by emerging-market central banks.

Tower Trading President Anthony Neglia said gold may “punch up” through $1,800 per ounce very shortly.

(Sources:  “Gold investment should double on persisting economic woes – Coutts,” Mineweb, October 10, 2012; PRECIOUS-Gold retreats with euro, mounting concern on growth,” Reuters, October 10, 2012; “Gold hews to tight range on global growth worries,” Marketwatch, October 10, 2012; “Neglia:  Gold May ‘Punch Up' Through $1800,” Bloomberg, October 8, 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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