As stock values rise and fall during the coronavirus crisis, advisors to the world’s wealthy are urging them to buy more gold. The move raises questions about the strength of the world’s financial markets and the long-term effect of huge spending from central banks.
Before the COVID-19 crisis, most private banks suggested that their clients hold none or just a small amount of gold. Now some are moving up to 10 percent of their clients’ financial holdings into the valuable metal.
The stimulus spending from central banks to re-start economies has reduced the amount of money investors make on bonds, making gold more appealing. The huge spending also raises the risk of inflation that would devalue other financial holdings.
Gold prices have already risen 14 percent since the start of the year to $1,730 an ounce as of last Thursday. Many private bankers believe that gold – which is somewhat safe from both inflation and deflation – will continues to increase in value. And the increase in demand could itself lead to higher gold prices.
Representatives of nine banks, which oversee around $6 trillion in assets for the world’s extremely-rich, spoke to the Reuters news service. They said they had advised clients to increase their gold holdings. Four of them also predicted that gold prices will end the year higher than they are now.
UBS, the world’s biggest wealth manager, said gold could rise to $1,800 by year-end. It said this would be driven by extremely-low interest rates and investors seeking gold to protect their assets. The bank suggested the price of gold could even reach a record high of $2,000 in the event of a second wave of novel coronavirus infections.
Lisa Shalett is the Chief Investment Officer for Wealth Management at Morgan Stanley. She said her bank is not advising clients to increase gold holdings above 10 percent. But she added it could get there, especially, if inflation rises.
John LaForge is with the Wells Fargo Investment Institute. Last year, he said he received about two calls a week from clients on gold. Now, he is at two calls a day. “I’m now getting as many questions on gold as I do on oil,” LaForge said.
There are four main ways to invest in gold. They include investing in gold mining companies and index funds, which represent shares in real gold or follow the price of gold. There is also investing in financial instruments such as futures and options or buying gold itself, in the form of bars or coins.
Most of the larger banks offer storage services for gold bars and coins – long considered the safest investment. The bankers questioned by Reuters said they had seen an increase in demand for storage, especially in locations like Switzerland and Singapore.
I’m Pete Musto.
Pete Musto adapted this story for VOA Learning English using materials from the Reuters. Hai Do was the editor. We want to hear from you. Write to us in the Comments Section.
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Words in This Story
client(s) – n. a person who pays a professional person or organization for services
stimulus – n. something that causes something else to happen, develop, or become more active
price(s) – n. the amount of money that you pay for something or that something costs
asset(s) – n. something that is owned by a person or company
share(s) – n. any of the equal parts into which the ownership of a property or business is divided