Gold Price Spikes As Investors Focus on Hard Assets
by David Bogoslaw
Hard assets. That's what more investors are talking about and putting money into these days. Look at the price of gold this week, surging to an all-time high above $1,060 an ounce on Oct. 8. That wouldn’t have turned heads a year ago, when the world was staring into the economic abyss with the credit markets frozen and all asset prices in freefall. But now, with the stock market up 58% since March and growing confidence that an economic recovery is taking shape, what's the allure?
True, nobody expects the dollar's slide against the euro, yen and several other currencies to stop anytime soon. And people are justifiably nervous about what the ballooning U.S. Treasury's balance sheet will mean for future prosperity. But isn't speculation about the dollar losing its pre-eminence as the world's serve currency a bit premature?
Not to Jim Rogers, celebrated former hedge fund manager, world traveler and investment guru. He recommends gold and commodities that serve as a store of value since not many central banks insist on maintaining sound currencies and even those that do – Canada, Singapore and Australia – will be under pressure to follow the trend if they want to stay competitive. He noted the worry that the world's central banks, having loaded up on so much debt to get their economies moving again, are likely to be tempted to inflate their currencies to drive down the costs of paying down that debt.
Rogers spoke to a packed auditorium of investors in midtown Manhattan on Oct. 8. The event was sponsored by London-based ETF Securities, which just launched its first physically backed gold and silver ETFs in the U.S. – ETFS Physical Swiss Gold Shares (SGOL) and ETFS Physical Silver Shares (SIVR). The company has provided commodity ETFs in Europe for most of the past decade.
Physically backed is meant to become a buzz word, to distinguish these vehicles from exchange traded funds that invest in commodities futures. The future of those funds is looking more and more iffy with the Commodities Futures Trading Commission imposing position limits on funds and looking at other ways to rein in speculation that can drive prices up.