High net worth investors putting more money into gold, according to private bankers

Written by Ray Clancy

Tuesday, 05 October 2010 11:11

The world’s wealthiest people have responded to economic worries by buying gold and by moving assets out of the financial system, according to bankers catering to the very rich.

Fears of a double dip downturn have boosted the appetite for bullion as well as for mining company shares and exchange traded funds, UBS executive Josef Stadler told the Reuters Global Private Banking Summit in New York.

‘They don’t only buy ETFs or futures, they buy physical gold,’ said Stadler, who runs the Swiss bank’s services for clients with assets of at least $50 million to invest.

UBS is recommending top tier clients hold 7 to 10% of their assets in precious metals like gold, which is on course for its tenth consecutive yearly gain and traded at around $1,314.50 an ounce on Monday, near the record level reached last week.

‘We had a clear example of a couple buying over a ton of gold and carrying it to another place,’ Stadler said. At today's prices, that shipment would be worth about $42 million.

Stadler added that the precious metal has become a staple of investors’ portfolios, despite questions about whether it makes for a smart long term investment. ‘If you talk to ultra high net worth individuals, that level of uncertainty has never been higher in the last two, three, four years,’ he explained.

Julius Baer’s chief investment officer for Asia is also recommending that wealthy investors park some of their assets in gold as a defensive stance following a string of lackluster US data and amid concerns about currency weakness.

‘I see gold as an insurance. I recommend 10% as minimum in portfolios and anything more than that to be used for trading purposes to respond to short term over bought or over sold signals,’ Van Anantha-Nageswaran said.

The uneasy outlook for inflation, hard currencies and global growth has triggered a five fold increase in a physical gold fund launched by Pictet one year ago, the Swiss private bank said.

Anthony DeChellis, managing director of Credit Suisse’s Americas private banking unit, said that clients are more interested in capitalizing on the rise in gold prices than using the precious metal as a safe harbour investment.

But not all bankers are recommending exposure to gold. Andreas Wolfer, head of private banking at UniCredit Group, attributed the run up in the price of gold to frayed investor nerves after the 2008 financial crisis as well as concerns about sovereign debt in the euro zone.

‘We have seen it but we have not overweighted it in our asset allocation. We strongly believe in an asset allocation having a clear and diversified portfolio, which sounds a bit boring but in the end it brings the best returns,’ Wolfer said.