PRECIOUS METAL In association with Helvetia Wealth

Brent McLean, Director Alternative Investments, Helvetia Wealth

With increasing uncertainty in other markets, such as equity and bonds, now is the time to consider investing in gold and other precious metals before its too late, writes Brent Mclean

Investing in gold is a great opportunity based on uncertainty in other markets. People are unsure about equity markets and there is a sense of feeling from investors that the banks don’t have as solid a foundation as they once held.

In stark contrast to other markets, gold has been steadily increasing over the last two months and so far this year has gained 14%. This is a considerable rise in value considering slumps in other markets. Gold has already broken through thresholds where the sticking point was considered to be around $708 to $712 per ounce. It broke through that barrier and there will be some consolidation as investors do a bit of profit taking. The price will have a bit of volatility on an intra day basis but will continue to rise through the next threshold of around $723 to $728 per ounce. By the end of the year it could be as high $800 an ounce and even as high as $1000 an ounce by end of 2008.

GOING GOLD 

Gold is considered by many to be a safe investment option and is something that people can easily understand. Instead of worrying about investing in, for example a bank, where the investor might not have any true indication as to the banks balance sheet, investors can easily see gold price changes on television and in the newspapers, making it an investment that is very easy to research and understand the value within their portfolio.

General consensus suggests that the US will continue to decrease their interest rates. This will also negatively impact the dollar which will be reduced in terms of its purchasing power. As the dollar moves lower, gold will become cheaper for those holding currency such as the euro or the pound. As these currency holders purchase gold the demand will drive up the price of gold.

PROFITA BLE PORTFOLIO 

Holding gold in ones portfolio is very beneficial to their wealth preservation because, as things stand, the price of gold will not go down any time soon. Typically you may buy physical gold, futures contracts or exchange traded funds which supports gold - all of these products are good to have in your portfolio, whether you are planning on having multiple assets or whether you are going to have it as a single entry point to the market. Based on the fact that gold is going to hold its price and is expected to continue to increase, it is a valuable investment. Gold is also a disposable asset and provides liquidity, if necessary to a portfolio.

During the credit crunch at the end of July, the gold price dipped as hedge funds sold gold to obtain cash to off-set the losses in their portfolios due to the sub-prime market. In these cases, gold was the fastest way to obtain cash for profit. Since this drop in the price of gold, the value has been raising rapidly and will continue to increase.

SUPPLY AND DEMAND 

The supply and demand of gold dictates considerably the value of the commodity. Gold is a natural resource and there is only a limited amount available. Plus it is equally difficult to obtain the ore from the ground and refine. Because of depleting supply, availability of gold as a product year on year has been decreasing while demand has been increasing.

In the past, central banks such as France, Spain and the Bank of England have been selling off their supply of gold, while Russia, China and even Indonesia have been increasing their gold reserve. However, in recent years miners have also been re-purchasing gold because they know the difficulties involved to excavate and purify the ore to proper gold bar standards. The fact that miners are now in the market purchasing gold indicates supply may not meet future demand and is another factor pushing up the price.

DIVERSIFICATION 

Investing in gold is a way for investors to diversify their portfolio by moving into precious metals and away from stocks and bonds. If a person is not interested in precious metals and more specifically gold, then at this point they should change their mindset because not only will gold protect what they have already gained in profits so far this year, it will definitely continue to increase. So minimize the risk in your current portfolio and invest in gold!

Author: Brent McLean, Director Alternative Investments, Helvetia Wealth
T: +41 4456 72230
Dublin Office T: +353 (0) 1 4830883
E: b.mclean@helvetia-wealth.ch
W: www.helvetia-wealth.ch