Ask The Experts: Why This Is A Good Time To Invest In Gold Equities
Bill Barbour, Director and Investment Specialist at Deutsche Asset Management, shares his views on the precious metals sector and explains why he is still positive on gold.
Given the recent increase in precious metals prices, do you still think it is a good time to invest in this sector?
- Gold prices have increased about 25% since the start of 2011 (as at 14 Sep 2011)
- Gold equities have declined 1.5% (as at 14 Sep 2011)
- Gold equities are usually leveraged against gold price by about 1.2 to 1.4 times. So gold equities tend to move up even more when gold prices increase
- Room for gold shares to catch up
Other than gold, what other precious metals is the fund positive on and why?
- Positive on platinum and palladium
- Higher demand for motor vehicles in developing world will result in higher usage of these metals in catalytic converters
- Platinum also enjoys demand from jewellery market
While most metals such as silver and platinum have industrial uses, the same can hardly be said of gold. Do you think the rapid increase in gold prices is sustainable?
- Gold also has some industrial uses, though not to the same extent as silver or platinum
- Primary use of gold still as a store of wealth due to limited supply
- Gold used as a hedge against erosion of currencies
- Remain very optimistic on gold prices
Conversely, what investment idea is the fund underweight on?
- Underweight silver
- Though silver has industrial demand, its primary use was in the photographic industry
- As people adopt digital photography, demand for silver will decrease
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