Financial planners have made minimal investments in gold because of a misplaced perception that it has previously been a speculative buy in that has soured, according to investment experts.
“I think most planners are putting zero into gold-related investments,” Select Asset Management chief investment officer Dominic McCormick said at a forum.
“It is a normal skepticism that you get, I think perhaps some [planners] were burnt because of the volatility of gold.”
However, McCormick argues that gold might have been a speculative investment in the past that was used as a hedge against inflation.
But today people buy it for fundamental reasons like the diminishing value of the once mighty US dollar and surging inflation around the world.
The precious metal has rallied from US$650 a year ago to a record US$1033.90 on March 17, according to New York Mercantile Exchange data.
McCormick believes its value could climb higher for three to five years.
“There are plenty of reasons why we can see gold going higher,” Baker Steel Capital Managers managing partner David Baker said.
Adding to the problems with the US dollar, Baker said companies had difficulty sourcing gold while surging petrol prices compounded the problem, he claimed.
However, McCormick and Baker agreed that gold could be a tricky investment for financial planners because gold companies were hard to pick and could have volatile stock prices.
McCormick said a sensible allocation to gold was around 5 per cent to 10 per cent.
Planners should diversify their gold investment with a mix of companies and funds, he concluded.
