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How to Invest in Gold

25 march 2009

Three well-known Western experts advise to invest in gold in the global financial and economic crisis environment.

Thus, Sylvain Serandour, a representative of French investment company Federal Finance, recommends investing into gold mines.

“Gold remains an attractive investment opportunity at the time when gold output is decreasing, while demand for gold never dies. We advise to invest into gold mines rather than into physical gold, since the latter has low liquidity and is subject to strong fiscal pressure,” the expert points out.

“It should also be taken into account that stock-exchange quotations of some gold mines doubled in recent months. They benefited from lowered production costs and devaluation of base currencies. Indeed, if production is paid for instance in Canadian dollars, which have lost significantly in their value, the product is then sold for U.S. dollars. Besides, placing their stake on gold mines investors will also get their dividends by contrast to physical gold,” he said.

Aymeric Biday, heading the investment portfolio service in Pictet, a Swiss bank, on the contrary is in favor of investments into physical gold.

“We are positive about gold future in 2009. There is demand for it on financial markets pushing its quotations upwards. This metal is the last means of protection in a worsening economic situation. In our opinion, in the coming months the gold price will reach the level of $1,200-1,300 per ounce. In case of a drastic downturn in economy it may be expected that its price will hit $2,000 per ounce,” Aymeric Biday noted.

“We advise investors to place their stake first of all on physical gold. Today, gold mines again “came into favor,” but gold production cost remains at $700 per ounce, so they are not the best investment opportunity. On the contrary, physical gold should be viewed as a currency,” he continued.

“If the economic situation will worsen followed by inflation, the gold rate in the coming months will continue to grow. In any case, we are still positioned on gold until a better situation in economy,” Aymeric Biday said.

“There is a speculative bubble inflated around gold,” believes on his part Jean-Bernard Guyon, a natural resources expert and general manager of Global Gestion, an independent French investment company. His advice is to invest equal proportions of capital into physical gold and gold mines.

“In uncertain periods in economy gold plays the role of a safe-haven asset. In the coming months it is difficult to predict the price of a gold ounce, but it well may be expected that it will reach $1,200 and moving anywhere higher would be excessive. Anyhow, the current trend is growth bound. The gold rate is spurred upwards mainly by investors and there is a risk of a speculative bubble inflated around gold, which may get busted any day soon,” Jean-Bernard Guyon goes on.

“Today, to have some profit from gold there are two possibilities – either physical gold or gold in mines. The first one went up about 35% during recent months, while the second, after a recession phase, shot up almost 100%. This can be explained in particular by lower production costs on the background of lower petroleum prices, cheaper labor force and, to a lesser extent, chemical products. So we would advise to balance the investment portfolio by physical gold and mine gold,” the expert says.

Alex Shyshlo, Rough&Polished European Bureau Editor, Antwerp