Glitter, glamour and gold

Glitter, glamour and gold
Sound advice Experts are warning their investors to reconsider how much of the commodity to keep within their portfolios
Published: 5 December 2012 - 7:32 a.m.
By: Neil Parmar

Arran Marshall knew he had to pull off a rare investment stunt after he tied the knot and decided it was time to buy a home. And he did. He dusted off dozens of gold antique pocket watches from his personal collection, sold them off, then slapped down a 20 percent deposit for the new house.

While Marshall now works in Jakarta, Indonesia, as a mining and metals analyst for the financial advisory AWR Lloyd, he’s no expert on gold antiquities. Fortunately for him, though, his aunt and uncle are. As big-time antiquity traders in Marshall’s native land of Australia, they agreed to oversee his investment’s sale — for a share in the profits, of course.

“The thing with old pocket watches is the purity of the gold isn’t necessarily as good as it is today, so sometimes you had to be a little careful in terms of the actual value of gold sitting in your hand,” says Marshall.

Regardless of its exact form, gold has long been seen by some as a hedge against sinking stocks, rising inflation and other enemies of an investment portfolio. The commodity is now trading above $1,700 per ounce and has risen every year since 2001, when its low was around $250. Those who believe gold is ultimately still within a bull market — opinions are mixed — are increasingly finding new or unique ways to invest in the shimmering stuff. Some businesses and investors alike have poured fat fortunes into searching for the precious metal within the depths of seas. Others are now looking up to the skies.

Planetary Resources, for one, brands itself as an asteroid mining company and is financially backed by billionaire executives who started Google. While it aims to build low-cost robotic spacecraft to explore resource-rich asteroids, it also wants to dig for precious metals that could include deep deposits of gold.

To be sure, some of the latest investment options may seem downright weird or wacky. One investor at the American financial firm USAA, for example, purchased several hundred thousand dollars worth of gold filings — because they could be sold to dentists. Overall, global demand for gold is nervously back on the rise, increasing ten percent between the second and third quarter this year, to $57.6bn. This figure is still down eleven percent from a record year-earlier level, according to data from the World Gold Council, although there is growing interest coming from the East.

India now accounts for 30 percent of the world’s gold demand, while the Middle East makes up 10 percent of the market. Within the UAE, “the retail sector expects further growth as more and more household investors are turning to gold, particularly as an investment,” says Sunny Chittilappilly, who, as chairman of the Dubai Gold and Jewellery Group, represents around 600 members within the industry.

“Therefore demand for gold as commodity and an investment tool has only been rising,” he adds.

While many investors in the Middle East and India typically prefer to hold gold in the form of jewellery, others around the world say there are various alternatives that may yield high returns. But, experts warn, these options also come loaded with plenty of risk. Ken Fried, who manages a New York City-based venture fund called Lightseed Capital, has put some of his investments in a company called Odyssey Marine Exploration. The business trades on the NASDAQ and explores deep-ocean shipwrecks, by searching for treasure such as gold coins. Even though Fried says his investment has ridden up and down waves over the years — and is now back around the level that the stock originally cost him — he’s holding onto it because he believes Odyssey may recover more gold and silver bullion from modern-day wrecks in the future.

“Given the depleting nature of traditional terrestrial gold mines, attention is shifting toward non-conventional sources,” says Fried.

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