Gold Lures New Class of Investors

Gold touched an intraday high of $1,254 in U.S. dollar terms yesterday but its appreciation in Europe’s major currencies has been the story for the past few weeks.

A few weeks ago (April 13) we showed you a similar chart detailing gold’s appreciation in major currencies but since then the deteriorating situation in Europe has sent gold soaring in terms of the euro and the British pound.

Since mid-April, gold has jumped 76.3 percent in euro terms and 60 percent in terms of the pound. This far outpaces gold’s advances in terms of the U.S dollar (29.21 percent) and Japanese yen (18.96 percent). For the year, gold is up more than 111 percent in euro terms and 102 percent in pounds.

This illustrates the effect of currency debasement on gold prices. Greece and Spain’s debt issues and the subsequent “fixes” by the European Union have raised questions about the long-term stability of the euro and sent investors looking for a hedge against monetary instability.

Not surprisingly, holdings in gold bullion-backed ETFs have hit a record and the SPDR Gold Trust (GLD) now holds more gold than all but five of the world’s central banks.

It seems the masses are beginning to lose faith that policymakers will be able to correct the debt issues without debasing their currencies; as a result a new class of investors are turning to gold.

The following securities mentioned in the article were held by one or more of U.S. Global Investors family of funds as of 3/31/10: SPDR Gold Trust

About Frank Holmes 263 Articles

Affiliation: U.S. Global Investors

Frank Holmes is CEO and chief investment officer of U.S. Global Investors, Inc., which manages a diversified family of mutual funds and hedge funds specializing in natural resources, emerging markets and infrastructure.

The company’s funds have earned more than two dozen Lipper Fund Awards and certificates since 2000. The Global Resources Fund (PSPFX) was Lipper’s top-performing global natural resources fund in 2010. In 2009, the World Precious Minerals Fund (UNWPX) was Lipper’s top-performing gold fund, the second time in four years for that achievement. In addition, both funds received 2007 and 2008 Lipper Fund Awards as the best overall funds in their respective categories.

Mr. Holmes was 2006 mining fund manager of the year for Mining Journal, a leading publication for the global resources industry, and he is co-author of “The Goldwatcher: Demystifying Gold Investing.”

He is also an advisor to the International Crisis Group, which works to resolve global conflict, and the William J. Clinton Foundation on sustainable development in nations with resource-based economies.

Mr. Holmes is a much-sought-after conference speaker and a regular commentator on financial television. He has been profiled by Fortune, Barron’s, The Financial Times and other publications.

Visit: U.S. Global Investors

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