Gold’s place in portfolios; monetary easing outlook

Gold has seen a drop in price in the last couple of weeks. This has investors wondering if this is the end of the great run gold has been on. ANZ’s Nick Trevethan is not ready to say so.  “Gold is neither currency nor commodity, but deserves to be treated as a unique asset class.” He added, “Gold needs to be seen as a portfolio diversifier and stabilizer. It should not be viewed in the context of simply inflation.” Tom Essaye, President of Kinsale Trading added, “gold tends to be whatever the market wants it to be at that point in time. For now, the market is treating gold as though it is a risk asset and commodity but if things get bad enough, it will become that store value, that emergency store value that it has been historically.”

Greece is still in the headlines and is having an effect on the precious metals market. As the political picture in Europe is at a standstill, investors are seeing the benefits. Mitsui Precious Metals analyst David Jollie says, “In the next few weeks leading up to the Greek election, there will be plenty of opportunities for people to worry about the European debt situation and the health of the euro in general. I think that will be positive for gold, certainly in the absence of foreign exchange movements.”

As the reports keep coming in and as the financial forecast looks lower, the chances of another round of monetary easing by the U.S.A. Federal Reserve gathers momentum.  It’s not only a weak economy, but as inflation comes down, it could be another reason for the Fed to implement some more stimulus,” said Gary Pollack, head of fixed-income trading at Deutsche Bank. Past monetary easing has brought positive results in the precious metals market.

At 1:00 p.m. (EDT), the APMEX precious metals spot prices were:

  • Gold – $1593.00- Down $0.40
  • Silver – $28.31- Down $0.48
  • Platinum – $1462.60- Up $1.30
  • Palladium – $613.00- Up $7.40
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