Gold makes good sense post-attack: Scott-Ram
Metal proves its worth in times of turmoil, strategist says: World council message
John Greenwood -- Financial Post
Jeff Vinnick, National Post
Richard Scott-Ram, chief portfolio strategist of the World Gold Council, stands outside the Pan Pacific Hotel in Vancouver, where he was speaking at a luncheon yesterday.
VANCOUVER - Though long out of favour with portfolio managers, gold makes just as much sense as a hedge against risk as it ever did, which has been made clear in the wake of the terrorist attacks of Sept. 11. That was the message Richard Scott-Ram, chief portfolio strategist of the World Gold Council, delivered at a speech in Vancouver yesterday.
Since the early 1980s, gold has been consistently falling in value as central banks dumped their bullion and investors went hunting for higher returns.
"Much of the U.S. stock market has weakened and the inflation rate has stopped declining," Mr. Scott-Ram said. "Meanwhile, the gold price has begun turning up from a very low level. Accordingly, portfolio managers are increasingly recognizing the need to diversify their portfolios into alternative assets, including gold."
Based in London, the World Gold Council is a non-profit organization, funded by some of the world's leading gold producers.
In 1982, gold was trading as high as US$629. In 1999, at the height of the technology bubble, it fell as low as US$255.
Since then, it has risen somewhat but the most dramatic advance was in the days after the attacks, when it jumped nearly 7% to US$293.
"[Gold] is an internationally recognized asset that is not dependent upon any government's promise to pay," Mr. Scott-Ram told his audience of mainly money managers and brokerage executives.
"This is an important feature when comparing gold to conventional diversifiers like T-bills or bonds."
Historically, gold has been a hugely popular asset for investors in search of capital growth as well as safety. More recently, however, it has lost some of its luster, first to the U.S. greenback and later to stocks and their promise of fat capital gains.
And among money managers, bullion lost favour as more sophisticated financial instruments became available. Indeed, it has been described as "a barbarous relic."
But in times of global turmoil, Mr. Scott-Ram said, gold consistently proves its value, reducing the likelihood of "unpleasant surprises for the investor."
But today, in the wake of the terrorist attacks and the U.S. dollar's decline, this is especially apparent. He said analysts believe that North American and world equity markets are headed for continued uncertainty and volatility.
"Gold bullion is available through brokerage firms and banks," he advised.
For investors who do not want to buy physical gold, there are a number of alternatives.
"The gold-linked instrument combines most of the attributes of an investment in gold with all the advantages of a bond," he said. "An important benefit of the gold-linked instrument is that it enables the investor to buy gold with an income."
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