Merrill Lynch Investment Managers (MLIM) highly rated MST World Gold and Mining Fund has seen a rise of 129% in US dollar terms over three years to the end of May 2002 - a return which compares very favorably to MSCI World Index which fell 19%. The price of gold hit US$327 at the end of May compared to a low of US$265 in July 2001, a rise that is expected to continue according to Evy Hambro, manager of the MST fund.
"Gold traditionally does well in economically uncertain times, particularly when investor sentiment is affected by geopolitical issues," he says. "World gold production is peaking, which coupled with increasing demand, suggest that the future for gold is bright."
With the continued uncertainty in equity markets assets investors are attracted to the 'safe haven' and diversification characteristics of gold. Gold typically does well as the dollar is weakening and its price movement has a low correlation with global stockmarkets.
Independant consultant, Marc Faber is also a fan of precious metals and has been since late 1999 when he wrote an article recommending Bill Gates should switch his shares into gold. Since then Microsoft shares are down by about 50% whereas gold has rallied by more than 10%. Faber believes there is room for new leadership to emerge in an asset class other than US stocks.
He argues that the Dow is very expensive compared to gold and an additional round of economic weakness would be even more bullish for commodities like gold than an economic recovery. His recent article 'Why you should own some gold' recommends that you should play the rising gold price by buying stocks of mining companies.
Investing in gold was one of the top private banking investment strategies last year according to an article in FinanceAsia's private banking publication Private Capital which comes with the June issue of FinanceAsia Magazine.
