Gold seen luring wealthy

New York: More so-called high-net-worth individuals are seeking to buy gold to protect their wealth from the risk of inflation after central banks boosted stimulus, according to Deutsche Bank AG’s asset and wealth-management unit.

“Gold has historically been considered to be a store of value and an inflation hedge and increasingly it is being utilised as a monetary instrument,” said Mark Smallwood, head of Asia-Pacific wealth-management solutions.

“There is a growing interest among our clients to gain exposure.”

Gold is in the 12th year of a bull run, 13 per cent higher this year, as investors seek to hedge against weaker currencies and the threat of rising consumer prices. Holdings in gold-backed exchange-traded products expanded to an all-time high yesterday, and Bank of America Corp and Deutsche Bank are among banks forecasting that the price will rally to a record.

“With the movements by the central banks globally in the last few weeks, there is considerable investor concern as to the long-term effects of the liquidity infusions,” Smallwood said by phone from Guilin, China yesterday. “As a result of that, private clients are concerned about the possible future effects of inflation and the means of hedging that risk.”

Immediate-delivery gold reached $1,779.50 (Dh6,536.53) an ounce on September 19, the highest price since February, after central banks took further steps to bolster their economies hurt by Europe’s debt crisis. The metal, which reached a record $1,921.15 on September 6, 2011, traded at $1,771.53 at 4:25 pm on Friday in Singapore.

Central Banks

The Bank of Japan said September 19 it will expand a fund that buys assets following the US Federal Reserve’s announcement last week of a third round of so-called quantitative easing, or QE, by buying $40 billion of mortgage-backed securities a month. China’s government has approved infrastructure plans to bolster the second-largest economy and the European Central Bank gave details this month of a program to buy the debt of member states.

“For our ultra-high-net-worth clients, and a growing number of our high-net-worth clients who have significant liquidity, they are becoming increasingly concerned to have at least some of their exposure to this asset class in the form of allocated physical bullion itself, rather than the indirect exposure that an over-the-counter product offers,” he said.

Gold will climb to $2,400 by the end of 2014 if the Fed’s latest easing lasts until then, Bank of America said September 18. Prices will exceed $2,000 in the first half of next year, Deutsche Bank wrote that day. The Fed said its purchases would last until it sees a “sustained improvement” in the economy.

Soros Buys

Billionaire investors George Soros and John Paulson increased their stakes in the SPDR Gold Trust, the biggest gold–backed exchange-traded product, in the second quarter, filings showed, while central banks from Russia to South Korea are also adding bullion to reserves. Central banks may purchase close to 500 tons this year after becoming net buyers in 2009, according to the World Gold Council.

Slowing global economies may hurt gold demand, which fell 7.1 per cent in the second quarter, the London-based council said on August 16. Imports by India, last year’s biggest buyer, slid 56 per cent to 131 tons in the second quarter, the council said. Indian purchases are down 31 per cent year-to-date, UBS AG estimated on Thursday.

Gold imports by mainland China from Hong Kong rose in July for the first time in three months, reaching 75.8 metric tons, according to data from the Census & Statistics Department of the Hong Kong government. Shipments to the second-largest user reached a record 103,644.5 kilograms in April.

“A clear, upward trend of gold prices will reignite investment demand in China and India,” Janet Kong, an analyst at China International Capital Corp, the nation’s largest investment bank, wrote in a report.