Gold Seen Attracting Wealthy in Central Bank Stimulus

September 21, 2012 – High-net-worth individuals are seeking to buy gold in higher numbers after the central banks have expanded stimulus programs globally, according to Deutsche Bank AG’s asset and wealth-management unit.

Mark Smallwood, head of Asia-Pacific wealth-management solutions, said gold had been considered a store of value and an inflation hedge historically and is being used increasingly in current markets as a monetary instrument. He added that there is a growing interest among the clients with Asia-Pacific to gain exposure to the gold market, with an increased preference for physical holdings.

Gold is currently in its twelfth year of a bull run, registering a 13.5 percent gain this year alone. Investors, currently, are seeking a hedge against weaker currencies and the possibility of rising consumer prices. Holdings in gold-backed exchange-traded products expanded to an all-time high yesterday and Bank of America and Deutsche Bank are forecasting the price will rally to a record.

Smallwood, speaking by phone from Guilin, China, said that the recent movements by central banks globally in the last few weeks have produced a considerable investor concern about the long-term effects of the liquidity infusions. Private clients are concerned about the possible future effects of inflation and are looking to hedge that risk with the aid of gold.

Gold for immediate delivery reached $1,779.50 per troy ounce on September 19, the highest price in the precious metal since February, following central bank’s steps to bolster economies damaged by the embroiling debt crisis in Europe. The spot price of gold, which reached an all-time nominal high at $1,921.15 on September 6, 2011, gained 0.4 percent to $1,774.85, according to Bloomberg.

If the latest Federal Reserve easing lasts until 2014, gold will reach the $2,400 per troy ounce level, Bank of America said on September 18. Deutsche Bank, writing on the same day, said price of gold would exceed $2,000 per troy ounce in the first half of next year. The Federal Reserve has said its latest round of easing would last until it sees an improvement in the labor market. As a part of its efforts, the bank will purchase $40 billion of mortgage-backed securities per month until the labor market improves.

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