Gold Fever Strikes the Über-Rich


"One super-rich couple bought 1 ton of gold, >$42M at today's prices."

Stock prices have been volatile since the credit crisis hit. The market hit multiyear lows in early 2009. The May "flash crash" showed that even the technology that allows markets to operate can be a danger to equity investments. Bonds have peaked in value, according to Goldman Sachs. And while U.S. real estate values have begun to recover in some regions, they're still failing in others.

So the rich (i.e., the very rich) have begun to hedge what they see as a dangerous financial world by buying gold. In some cases, they've begun to stock up on gold literally by the ton. Reports from Reuters' Global Private Banking Summit show several banks, led by Swiss giant UBS, have begun suggesting their wealthiest individual-investor clients put as much as 10% of their assets into gold. One banker said a super-rich couple bought a ton of gold—worth >$42M at today's prices—and moved it to another country. Others are buying gold by the bar.

One banker said inflation concerns and global economic instability pushed the rich into hard assets.

For the buyers, the most dangerous aspect of this gold fever is that numerous experts don't expect its value to go much higher. However, central bank (CB) actions like the Bank of Japan's move to cut its benchmark rate to near zero may lift gold's value further. As CBs in the EU, Japan and U.S. change monetary policy, currency values could drop and extremely low interest rates could eventually cause runaway inflation.

Still, the gold price has risen from a 52-week low of $1,026/oz. to a recent all-time high of $1,329—a tremendous run that raises the logical question: How long it can last? But for now, the richest of the rich appear to be banking on it continuing.

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