Gold Fever Strikes the Super-Rich By DOUGLAS MCINTYRE|
Oct 5th 2010 8:43 AM
Stock
prices have been volatile since the credit crisis hit. The
market hit multiyear lows in early 2009. The May "flash
crash" showed that even the technology that allows
markets to operate can be a danger to equity investments.
Bonds have peaked in value, according to new research from
Goldman Sachs Group (GS). And while U.S. real estate values
have begun to recover in some regions, in others they are
still falling.
So the rich -- that is, the very rich --
have begun to hedge what they see as a dangerous financial
world by buying gold. And, in some cases they've begun to
stock up the precious metal literally by the ton. Reports
from the Reuters Global Private Banking Summit show that
several banks, led by Swiss giant UBS (UBS), have begun
to suggest that their wealthiest individual investor clients
to put as much as 10% of their assets into gold. One banker
said that a super-rich couple bought a ton of gold -- worth
more than $42 million at today's prices -- and moved it
to a country where they don't live. Other clients are buying
gold by the bar.
One banker told Reuters that concerns about
inflation and global economic instability have pushed the
rich to seek hard assets.
The most dangerous aspect of this gold fever
for the buyers is probably that a number of experts don't
expect the value of the metal to go much higher. However,
actions by central banks -- such as Tuesday's move by the
Bank of Japan to cut its benchmark rate to near zero --
may lift the value of gold still further. As central banks
in the EU, Japan and the United States change monetary policy,
the value of currency could drop, and extremely low interest
rates could eventually cause runaway inflation.
Still, the price of gold has risen from
a 52-week low of $1,026 to a recent all-time high of $1,329.
That is a tremendous run, which raises the logical question
of how long it can last. But for now, the richest of the
rich appear to be banking on it continuing.