Gold holdings could double on economic woes: Coutts

Investors should double the amount of gold they hold as the value of paper currency diminishes along with the prospects for global economic growth, said a senior executive at Coutts, the private banking arm of Britain’s Royal Bank of Scotland.

Ideally, investors should aim to have 7 to 8 percent of their assets in gold, above the wealth management industry’s average of 3 percent, Gary Dugan, Coutts’ chief investment officer for Asia and Middle East, told Reuters.

“What’s happening in precious metals is that they are becoming more mainstream,” Dugan said, adding that ten years ago investors rarely held any gold in their portfolios.

“Some of the clients ask where gold prices are going, and I say don’t even think about prices. It’s a store of value.”

Physical vs ETFs

Spot gold perched above $1,760 an ounce on Wednesday, down from an 11-month high of $1,795.69 struck last week on support from recent stimulus measures taken up by key central banks.

Dugan expected gold prices to rise towards $2,000 in the next several months, supported by short to medium-term factors including purchases by emerging-market central banks.

Gold’s appeal is also likely to increase as the world economy has become more volatile and unstable after decades of usually steady growth, and there appears to be no swift solution to the structural problems emerging in the U.S. and European economies, Dugan said.

“We are going back to normality, and the normality is that precious metals are the core part of your portfolio,” he added.

Coutts said its preferred method of gold investment is exchange-traded products, which provide low-cost and liquid ownership of physical metal secured in underground vaults.

But 15 to 20 percent of its clients prefer to hold their gold in a vault they trust, rather than putting money in gold-related financial instruments, as they have little trust in the financial system, Dugan said.

“One client literally took delivery in a van, because he did not trust any bank to store his gold for him,” he said.

Holdings of gold ETPs reached a record high of 74.76 million ounces by Oct. 8, up 6 percent over the past two months. –Reuters