Capital Gold Group Report: Gold Beats All in Decade of ‘Fear and Greed’

By John Glover

Dec. 22 (Bloomberg) — Investors who bought gold or commodities at the beginning of the decade should have tripled their money by the time the ball drops in New York’s Times Square on Dec. 31. Stock holders will be poorer.

The CHART OF THE DAY shows returns on six asset classes, including reinvested interest or dividends where applicable. A $100 investment in gold would now be more than $380 while the same sum in commodities would have grown to about $357, according to the Standard & Poor’s GSCI Enhanced Total Return Index. Stock investors lost $10 in the decade.

Gold’s nine-year bull market was recently given extra impetus by concern that $12 trillion of government spending to rein in the worst global recession since the 1930s will trigger inflation. China’s thirst for the raw materials needed to fuel its export machine helped push up the price of commodities from copper and lead to plastics and coal.

“That’s fear and greed at the same time,” said Toby Nangle, director of asset allocation at Baring Investment Services Ltd. in London. “The fear of inflation is in the gold price. Commodities and oil show emerging markets emerging, and the rest is the developed markets submerging.”

Holders of U.S. high-grade corporate bonds made a profit of about $90 on their investment, as did Treasury investors, according to Bank of America Merrill Lynch index data. Buyers of crude oil saw their $100 turn into $268 after it rose to more than $500 in 2008, based on the futures contract for West Texas Intermediate.

Stocks lost about 10 percent, including reinvested dividends, according to the S&P 500 Total Return Index.

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Capital Gold Group Report: Russia Transfers $1 Bln Worth Gold To Central Bank

By The Associated Press 12/21/09 – 10:13 AM EST

MOSCOW (AP) — Russia’s Finance Ministry has sold 30 metric tons of gold to the country’s Central Bank for $1 billion, an official said Monday, saying the cash will be use to help ease the crisis in the country’s budget.

The cash slightly reduces Russia’s deficit — reportedly around 7.3 percent of gross domestic product this year. The Central Bank is the only government body mandated to engage in foreign commodity and currency trade.

The deal marks the first large sale of gold from Russian coffers since the collapse of the Soviet Union. Russia is weathering its worst financial crisis in a decade.

Russia’s finance minister said in October that Moscow was considering a gold sale on world markets to cash in on high prices as the government faces its first budget deficit in a decade.

A Finance Ministry spokesman said the deal was struck last week. The spokesman, who declined to be identified because he was unauthorized to comment on the deal, would not say what the Central Bank planned to do with the gold, but Finance Minister Alexei Kudrin said in October that Moscow was considering selling gold on world markets to cash in on high prices and further replenish the budget.

Bank representatives said they were unaware of the deal.

Russia’s gold and foreign currency reserves — the world’s third-largest —stood at $443.7 billion as of Dec. 11, according to the Central Bank. The gold reserves stood at some 613 metric tons as of Dec. 1 worth $23 billion.

The Russian government — also a major holder of U.S. dollars — has spoken strongly in favor of diversifying its reserves, but has so far done little to follow through.

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Capital Gold Group Report: CONDITIONS FOR GOLD RALLY COULD CRUSH OTHER ASSETS – “$3000/oz increasingly likely long-term target”

Conditions for gold rally could crush other assets

By V. Phani Kumar & Myra P. Saefong, MarketWatch
Dec. 18, 2009, 10:06 a.m. EST

HONG KONG (MarketWatch) — Several analysts predict a rise in gold prices to dizzying heights in the next two years, but if those forecasts prove true, even gold bugs will need to stay alert to ensure that gains in the metal aren’t overwhelmed by losses on other parts of their portfolio.

That’s because the economic conditions under which one would expect gold to thrive resemble an investor’s nightmare — possible hyperinflation, collapse of the U.S. dollar or a surge in yields on Treasuries — may be conditions under which other asset classes such as fixed income and equities could take a major hit.

“For gold to rise further, people have to continue to be fearful of economic recessionary conditions worsening instead of improving, political developments both at home and globally, and financial markets deteriorating instead of continuing to improve,” said Jeffrey Christian, a managing director at CPM Group.

Mark O’Byrne, a director at bullion dealer GoldCore said gold could “rally much higher in the event of another systemic crisis where large banks, corporates and or even countries go bankrupt.”

It could also go much higher in the event of serious inflation or stagflation, in the event of a dollar crisis or an international monetary crisis, or a serious geopolitical incident, he said. And “at least one of these scenarios is quite possible in 2010 or 2011.”

Those scenarios aren’t at all friendly to the rest of an investor’s portfolio.

Gold futures rose as high as $1,218 an ounce in early December before sliding back to the low $1,100 area, where it traded on Friday.

The right stuff

A number of analysts say gold could see new highs over the next few years, thanks to the flood of liquidity in the global financial system in the wake of quantitative easing measures by central banks around the world in the wake of last year’s financial crisis.

“The right fundamentals for gold … remain in place and look set to remain in place for the foreseeable future,” said O’Byrne. “This makes $3,000 per ounce gold an increasingly likely long-term price target.”

Kevin Kerr, president of Kerr Trading International said the precious metal’s “more likely to hit $3,000 than $800 in the next two years.”

“I am bullish longer term on the U.S. and global economies, but … I feel the die has been cast for lower fiat currency prices in years to come and a global shift out of the dollar and into commodities as the new reserve currency,” he added.

Kerr listed hyperinflation, more job losses in the U.S., negative interest rates for an extended period of time, efforts to price crude oil in currencies other than the U.S. dollar and attempts by China to move a larger part of its foreign currency holdings into gold as conditions that would support a further increase in the yellow metal’s prices.

A number of other commentators have also been known for their bullish views on gold.

CLSA Asia-Pacific Markets, for instance, has for a while maintained that gold could hit $3,360 by the end of this decade. Economic analyst Marc Faber, Gluskin Sheff chief economist David Rosenberg, investor Jim Rogers, investment manager David Tice have all been reported in the media as saying that gold prices could reach a range between $2,000 and $3,000.

And Amerifutures managing director Patrick Kerr lists gold purchases by central banks, “the deepest pockets of them all,” as one of his 10 reasons why gold could shoot up to between $5,000 and $10,000 an ounce.

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Capital Gold Group Report: Gulf petro-powers to launch currency in latest threat to dollar hegemony

By Ambrose Evans-Pritchard
Published: 7:12PM GMT 15 Dec 2009

The Arab states of the Gulf region have agreed to launch a single currency modelled on the euro, hoping to blaze a trail towards a pan-Arab monetary union swelling to the ancient borders of the Ummayad Caliphate.

“The Gulf monetary union pact has come into effect,” said Kuwait’s finance minister, Mustafa al-Shamali, speaking at a Gulf Co-operation Council (GCC) summit in Kuwait.

The move will give the hyper-rich club of oil exporters a petro-currency of their own, greatly increasing their influence in the global exchange and capital markets and potentially displacing the US dollar as the pricing currency for oil contracts. Between them they amount to regional superpower with a GDP of $1.2 trillion (£739bn), some 40pc of the world’s proven oil reserves, and financial clout equal to that of China.

Saudi Arabia, Kuwait, Bahrain, and Qatar are to launch the first phase next year, creating a Gulf Monetary Council that will evolve quickly into a full-fledged central bank.

The Emirates are staying out for now – irked that the bank will be located in Riyadh at the insistence of Saudi King Abdullah rather than in Abu Dhabi. They are expected join later, along with Oman.

The Gulf states remain divided over the wisdom of anchoring their economies to the US dollar. The Gulf currency – dubbed “Gulfo” – is likely to track a global exchange basket and may ultimately float as a regional reserve currency in its own right. “The US dollar has failed. We need to delink,” said Nahed Taher, chief executive of Bahrain’s Gulf One Investment Bank.

The project is inspired by Europe’s monetary union, seen as a huge success in the Arab world. But there are concerns that the region is trying to run before it can walk.

Europe took 40 years to reach the point where it felt ready to launch a currency. It began with the creation of the Iron & Steel Community in the 1950s, moving by steps towards a single market enforced by powerful Commission and European Court. The EMU timetable was fixed at the Masstricht in 1991 but it took another 11 for euro notes and coins to reach the streets.

Khalid Bin Ahmad Al Kalifa, Bahrain’s foreign minister, told the FIKR Arab Thought summit in Kuwait that the project would not work unless the Gulf countries first break down basic barriers to trade and capital flows.

At the moment, trucks sit paralysed at border posts for days awaiting entry clearance. Labour mobility between states is almost zero.

“The single currency should come last. We need to coordinate our economic policies and build up common infrastructure as a first step,” he said.

Mohammed El-Enein, chair of the energy and industry committee in Egypt’s parliament, said Europe’s example could help the Arab world achieve its half-century dream of a unified currency, but the task requires discipline. “We need exactly the same institutions as the EU has created. We need a commission, a court, and a bank,” he said.

The last currency to trade in souks from Marakesh, to Baghdad and Mecca, was the Ottomon Piaster, known as the “kurush”. It suffered chronic inflation as the silver coinage was debased.

There is a logic to an Arab currency. The region speaks one language, has the unifying creed of “Umma Wahida” or One Nation from the Koran, and has not torn itself apart in savage wars – ever – in quite the way that Europe has in living memory.

Yet hurdles are formidable even for the tight-knit group of Gulf states. While the eurozone is a club of rough equals – with Germany, France, Italy, and Spain each holding two votes on the ECB council – the Gulf currency will be dominated by Saudi Arabia. The risk is that other countries will feel like satellites. Monetary policy will inevitably be set for Riyadh’s needs.

Hans Redeker, currency chief at BNP Paraibas, said the Gulf states may have romanticised Europe’s achievement and need to move with great care to avoid making the same errors.

“The Greek crisis has exposed the weak foundations on which the euro is built. The gap in competitiveness between core Europe and the periphery has grown wider and wider. The obvious mistake was to launch EMU without a central fiscal authority and political union, as the Bundesbank warned in the 1990s,” he said.

“The euro was created for political reasons after the fall of the Berlin Wall to lock Germany irrevocably into Europe. It was not done for economic reasons,” he said.

Ben Simpfendorfer, Asia economist for RBS and an expert on the Middle East, told the FIKR conference that the rise of China had paradoxically disrupted the case for pan-Arab economic integration.

There was a natural fit ten years ago between rich oil state and low-wage manufacturers in Egypt and Syria, but cheap exports from China have forced poorer Arab states to retreat behind barriers to shelter their industries. “The rationale for a single currency has become weaker,” he said.

The GCC also agreed to create a joint military strike force – akin to the EU’s rapid reaction force – to tackle threats such as the incursion of Yemeni Shiite rebels into Saudi territory earlier this year.

This is a major breakthrough after years of deadlock on defence cooperation.

The Sunni Gulf states are deeply concerned about the great power ambitions of Shiite Iran and its quest for nuclear weapons, to the point where the theme of a possible war between Iran and a Saudi-led constellation of states has crept into the media debate.

They nevertheless repeated on Tuesday that “any military action against Iran” by Western powers would be unacceptable.

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Capital Gold Group Report: Inflation Fears Boost Gold Prices

—Written by Alix Steel in New York.

12/16/09 – 09:57 AM EST

Inflation worries shook markets after the producer price index jumped 1.8% in November. During times of inflation, the U.S. dollar loses value and investors buy gold as an alternative asset buoying prices. Investors are also waiting on the result of the Federal Reserve’s FOMC meeting. The Fed is expected to keep interest rates low for now but there is a growing consensus that the Fed will raise rates sooner than expected to combat growing inflation.

Analysts expect gold to stay in a tight range of $1,110 to $1,140 for the end of the year as profit taking and bargain hunting restrict prices. “I think we’re seeing light volume in the market as a start”, says Will Rhind, head of U.S. operations at ETF Securities. “Expect to see more concentration on inflation numbers over the next year as people look for any signs of consumer prices in the real economy.”

The U.S. dollar index was slipping .13% to $76.82 and inversely gold prices were up $9 to $1,132 at the Comex division at the New York Mercantile Exchange. Gold deliver for February has traded as high as $1,136.10 and as low as $1,122.40.

Silver prices were rising 8 cents to $17.53 while copper was up 3 cents to $3.17.

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Capital Gold Group Report: U.S. Mint Suspends All One Oounce Gold Coin Sales Due to Shortage of Physical Gold!

LONDON –

“The United States Mint has depleted its inventory of 2009 American Buffalo One Ounce Gold Bullion Coins. … No additional inventory will be made available. As additional information becomes available regarding 2010-dated American Buffalo One Once Gold Bullion Coins, you will be notified.”   So said a memorandum issued Friday to authorized purchasers of U.S. Mint gold coins and reported by Jim Sinclair..

Mineweb reported only two weeks ago, on November 25^th, the suspension of sales of American Gold Eagle coins by the Mint – U.S. Mint suspends American Eagle 1-ounce gold coin sales – again, which, at the time, reckoned such sales would be resumed early this month – but in the event, not only is the suspension of the Gold Eagle coin sales continuing, but also now the American Buffalo one ounce gold coin sales have also been suspended, with no new sales now planned until some time in 2010 – although the current sharp fall in the gold price may provide the Mint with a bit of respite from its supply/demand woes.

But supply problems also persist with smaller gold coins, particularly given the enormous demand for fractional sized gold coins following the suspension of the one ounce Gold Eagles. Thus the Mint was forced to issue a second memo on Friday saying “the American Eagle Gold Tenth-Ounce Coin inventory was depleted” and that “inventory for the half-ounce and quarter-ounce coins remains very limited.” Following the sale of these remaining gold coins on Friday, the Mint anticipated that it would again offer all fractional sizes by mid-December, but in an allocation process.

On a more positive note for the Mint, the resumption of American Silver Eagle bullion sales will resume today. These silver coins were suspended along with the one ounce gold coins a week ago – also due to depletion.

The Mint had been trying to control sales by not releasing the 2009 coins for sale until late in the year – they are usually available throughout the year, but demand has proven to be enormous.  This doesn’t mean though that coins are not available to the U.S. public as some authorized dealers will continue to hold stocks, although these are being depleted rapidly and premiums charged on sales are increasing.

According to a report on website Coinupdate.com “The US Mint began sales of fractional weight American Gold Eagle bullion coins on December 3, 2009…. These fractional Gold Eagles are typically available throughout the year, but this year the Mint delayed the release to focus production on the one ounce bullion coins. After only one day of availability, the US Mint recorded sales of 56,000 of the one-half ounce coins, 58,000 of the one-quarter ounce coins, and 260,000 of the one-tenth ounce coins. They have indicated that the inventory for one-tenth ounce coins has already been depleted and the inventory for one-half and one-quarter ounce coins is limited. The remaining limited inventory will be offered via the US Mint’s standard allocation process and additional inventory is expected to be available in mid-December.”

While the shortage of U.S. Mint offerings due to demand exceeding supply is, in reality, not that significant in terms of global gold sales it does demonstrate the extent to which demand for easily available physical gold has increased over the past two years.  Some of this has been the ever increasing interest by the U.S. public in gold in general and also a certain amount of distrust generated by some commentators as to whether the various ‘paper gold’ offerings were secure.

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Capital Gold Group Report: China’s Appetite for High-Flying Gold to Dominate

By Chikako Mogi

SHANGHAI, Dec 2 (Reuters) – Gold’s successive run-ups to record highs are underpinned by hopes for central banks to further diversify reserves, particularly China’s, a topic set to dominate a two-day industry gathering in Shanghai from Thursday.

News that the central bank of India bought 200 tonnes of gold from the International Monetary Fund, about half of what was on offer, reinforced views that gold has established its status as an investment asset, as well as an alternative currency.

The move also strengthened speculation that other emerging country central banks will follow suit, particularly China, which has the world’s largest foreign exchange reserves worth $2.27 trillion, mostly held in U.S. Treasury bonds.

“It’s possible for China to buy gold from the IMF in large volumes in pursuit of asset allocation for its foreign reserves, but that will mean further detachment from dollars of which China holds the most. This puts China in a real dilemma,” said Xiao Minjie, senior economist at Daiwa Institute of Research in Tokyo.

For a factbox on Asian central banks’ views on gold, click [ID:nSP429396]

Perceived dollar weakness in coming years, which has been the other main factor driving up gold prices, is a source of concern for China and others with large investments in dollar assets as the depreciating currency erodes asset values.

A team of experts from Beijing and Shanghai set up a task force last year to study the issue of gold reserves, Ji Xiaonan, chairman of a supervisory board for big state-owned companies under China’s state assets commission, was quoted as saying.

“We suggested that China’s gold reserves should reach 6,000 tonnes in the next 3 to 5 years and perhaps 10,000 tonnes in 8 to 10 years,” the China Youth Daily on Monday quoted him as saying. [ID:nPEK200596]

Views seemed split among Chinese officials over the issue, Xiao, at Daiwa Institute of Research, said. Such a report might be a bid to send a message to the United States that China would buy gold if the U.S. didn’t stop a dollar freefall, he added.

OUTLOOK ON DEMAND, OUTPUT

China said in April its official gold holdings had risen to 1,054 tonnes from 600 tonnes in 2003, still making up less than 2 percent of its total foreign exchange holdings. The rise was from buying domestically produced gold to help soak up unsold output.

China, the world’s top gold producer and second biggest gold consumer after India, is expected to eventually tap the global market as domestic supplies will probably tighten on growing demand.

“China’s central bank buying has been limited to taking it from local mine production and scrap, which is a much cheaper method than buying either IMF or open market gold,” said Peter McGuire, managing director of Commodity Warrants Australia.

“China may tap the IMF or global marketplace for gold in order to expand its proportion of gold to forex holdings for the purpose of diversification and the desired quantities cannot be sourced on the lower cost domestic market,” he said.

China’s gold output rose 13.4 percent in the first seven months of this year to 172.867 tonnes, and it produced 26.36 tonnes in July, the China Gold newspaper said in September, citing figures from the China Gold Association. In 2008, China produced a record 282 tonnes of gold, and consumed 395.6 tonnes.

For a factbox on reserves held by China and India, click: here

For a factbox on top ten country holders of gold reserves, click: [ID:nSP482249]

EYES ON JEWELLERY DEMAND

Traders are watching to see if jewellery demand will persist even at current high prices, which would indicate expectations for further increases in prices.

A World Gold Council report last month showed that market supplies of recycled gold rose in the third quarter from a year earlier but fell from the first two quarters of 2009 despite rising prices, suggesting investors were releasing less gold in anticipation of a future market climb.

“We were hearing Chinese demand is strong, even expensive jewellery is being bought, which is bullish for the gold market,” said Wakako Harada, a senior trader at Mitsubishi Corp in Tokyo.

Gold’s rally, which pushed prices up 13 percent in November for a total rise of 39 percent this year, was briefly interrupted last week when investors dumped it to cover losses in other assets after markets tumbled broadly on news two Dubai flagship firms planned to delay repaying billions of dollars in debt.

For a timeline on gold prices, click: here

For a factbox on gold’s record highs, click: [ID:nSP415372]

But the sell-off spelt good buying opportunities for those who had lagged when prices raced up towards $1,200, traders said, citing expectations for the dollar’s continuing weakness and public sector interest as keeping bullish sentiment alive.

“There was a sense of a ceiling and that likely put a cap on prices,” said Yuichi Ikemizu, Tokyo branch manager for Standard Bank.

“At the same time, the unwinding of these “weak longs” was immediately countered by buying which helped bring prices off their lows. This shows there are still people who want to buy and underscores the bullish underlying trend.”

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Capital Gold Group Report: GOLD ENDS AT A RECORD HIGH ABOVE $1,200

Precious metal continues record run on dollar weakness.

By Hibah Yousuf, CNNMoney.com staff reporterLast Updated: December 2, 2009: 3:58 PM ET

NEW YORK (CNNMoney.com) — Gold prices closed at a fresh record high above a $1,200 an ounce Wednesday, the first time it has settled above the milestone, as investors continued to build on the momentum of the precious metal.

Gold for February delivery climbed $12.80, or 1.1%, and settled at $1,213.

“There’s still a rush to buy safe haven assets,” said Carlos Sanchez, analyst at CPM Group. A weak dollar and concerns over economic conditions and financial markets, most recently because of what’s happening in Dubai, have been boosting prices. “Investors are continuing to move toward gold as a hedge against other possible adverse events,” he said.

Gold prices have surged more than 34% in 2009 and have risen steadily since the beginning of November.

Dump the Dollar!  Buy Gold!

While the dollar firmed Wednesday against the euro and the yen, gold prices were supported by the greenback because it remains soft as the Federal Reserve holds interest rates near zero into next year.

In a jittery economy, commodities priced in dollars, such as gold, are perceived as safe haven investments and typically gain ground with a weaker dollar.

Investors will continue to buy gold at high prices as they have been the past several months, Sanchez believes, leading prices to continue rising steadily. He expects them to near $1,400 during the first quarter of next year.

But after the $1,400 mark, Sanchez expects prices to lower and average around $1,000 for the remainder of 2010. 

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Capital Gold Group Report: Gold Hits Fresh High of $1,200 on Weaker Dollar

By Moming Zhou & Polya Lesova, MarketWatch

NEW YORK (MarketWatch) — Gold futures climbed to a fresh record above $1,200 an ounce Tuesday, as the dollar weakened and as the world’s largest gold miner eliminated all of its gold hedges, showing confidence in a rising gold price.

The dollar continued its slide as worries over Dubai’s debt woes eased, pushing up dollar denominated commodities prices. Barrick Gold Corp. said it has eliminated its gold hedges ahead of schedule and now has full leverage to the gold price.

Gold for December delivery rose as high as $1,202.70 an ounce. The front-month contract ended up $18, or 1.5%, at $1,199.10 an ounce on the Comex division of the New York Mercantile Exchange.

Gold ended November trading with one of the biggest gains in 10 years, up 13%. Futures only saw two losing sessions last month.

“The familiar formula of a weaker dollar, high volume, and higher equities still brings new buyers every day,” said George Gero, a precious-metals trader for RBC Capital Markets, adding that Barrick’s elimination of hedges helped present a bullish view.

Investors continued to add their positions in gold exchange-traded funds. Holdings in SPDR Gold Trust /quotes/comstock/13*!gld/quotes/nls/gld (GLD 117.46, +1.82, +1.57%) , the biggest gold ETF, rose to 1,129.99 metric tons as of Monday, up more than 2 metric tons from a day ago.

Holdings in all gold ETFs hit a new high of 1,768.5 metric tons, according to data collected by Barclays.

The prices of gold and other commodities have showed a strong inverse relationship with the dollar. In Tuesday trading, the dollar index /quotes/comstock/11j!i:dxy0 (DXY 74.31, -0.57, -0.76%) , which tracks the performance of the greenback against a basket of other major currencies, fell 0.8% to 74.291 in recent trading.

Barrick /quotes/comstock/13*!abx/quotes/nls/abx (ABX 46.41, +3.72, +8.71%) /quotes/comstock/11t!abx (CA:ABX 48.19, +3.31, +7.38%) ‘s announcement of hedge elimination came as gold repeatedly hit new highs in recent trading.

“Our positive view on the gold price led us to accelerate the elimination of these contracts ahead of the schedule we had established,” said Aaron Regent, Barrick’s president and chief executive officer, in a statement.

Barrick said in September that it planed to eliminate all of its gold hedges within 12 months.

“With their elimination we no longer have any gold price related mark-to-market exposure and will now fully benefit from increases in the gold price,” he said.

Gold hedges were contracts where Barrick had sold forward gold ounces and would receive a fixed price upon delivering into these contracts.

As a result, the company did not benefit from any increase in the gold price, but the mark-to-market liability, or costs of these contracts, would increase with a rise in the gold price.

While gold is traditionally seen as a safe-haven investment, it has lately been trading as a risk asset, moving in tandem with stocks and other commodities.

In other metals, December silver rose 68.5 cents, or 3.7%, to $19.18 an ounce, December palladium gained $18, or 5%, to $381.55 an ounce, and January platinum added $26.40, or 1.8%, to $1,486.60 an ounce.

December copper rose 5.5 cents, or 1.7%, to $3.2035 a pound.

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Capital Gold Group Report: Gold – Hitting All-time Highs on a Weekly Basis

Striking Gold

By Dan Greenshields

SEATTLE (MarketWatch) — Holiday shopping have you in a quandary? Having trouble deciding on that perfect gift? Think gold.

It could make the shopping season a bit easier. Whether you choose gold jewelry or the gift of gold in the form of stock, gold is a truly precious metal and there are some things you need to know before you head off to the investment mine.

Daily media accounts show that gold is hitting new all-time highs on a weekly basis, even when adjusting for inflation. Ever-cautious investors continue to ask: Have gold prices hit their peak? Will a shift in economic policy by the Federal Reserve strengthen the dollar and cause gold’s value to fall?

If the “gold” option resonates with you, there are some facts you should know. Investors generally keep a portion of their portfolios in gold for four “elemental” reasons:

1. Gold’s unique properties make it valuable in many ways — from powering cell phones and computers to being a perfect crown on a tooth. It is a unique asset, and because its financial performance is not strongly correlated to stocks, bonds or real estate, it can provide investors with another method of diversification.
2. Besides its natural beauty, gold is nearly the perfect element for manufacturing fine jewelry because of its ability to be shaped and never lose its luster. Some form of gold jewelry is always in fashion. It can easily be made into a ring, bracelets, or necklace — practically anything.
3. Gold is rare and virtually indestructible. These two features have made it a treasured commodity dating back to early Mediterranean cultures in 3000 B.C. when gold served as both jewelry and currency. Gold has outlived most governments and fiscal policies.
4. Gold can’t be easily substituted. Because it’s rare and highly valued, central banks and some governments use it to back their currencies. Only 161,000 tons of gold have ever been extracted from the earth, barely enough to fill two Olympic-size swimming pools, according to National Geographic.

Owning gold: How much is too much?

Still, the rule of thumb for investing in gold is generally 5% to 15% of a portfolio, depending on an investor’s time horizon and goals. Since 1973, gold has provided a Real Annual Return of 1.8%. More recently, it has been on a market tear, returning 19.7% in compounded annualized returns since November, 2004.

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