Reasons for Investing in Gold are 'not going away'

Richard Davis from BlackRock suggested yesterday (December 3rd) that the reasons why Gold Investment is a sound strategy are "not going away", the Financial Times reports.

The yellow metal hit a record price of $1,227 per ounce this week, with buying spurred by weakness in the dollar and a desire from investors to secure a hedge against the possibility of inflation.

Mr. Davis, whose company manages $1.435 trillion in assets, explained that other key factors - such as central-bank buying - are a sign that gold could move even higher in the future.

"We've been in a gold bull market for a number of years. It bottomed out in 2001 but has recently picked up. There are many reasons why gold is seen as a good investment and those reasons don't seem to be going away," he told the newspaper.

"This year we've seen reasonably steady net inflows into gold equities, which is a sign that the price will rise. If there's further news that central banks will buy gold, this will also boost investor demand."

Meanwhile, major financial services company UBS has announced that it expects the current Gold Price rally to continue well into next year, with a peak at about $1,300 per ounce.

Dominic Schnider, director of commodity research at Europe's second-largest bank, explained that investors should adopt a covered strategy call on gold.

"We recommend that gold is held physically and a call is sold on it, with a strike of about $1,300, so that investors will be able to collect on the premium even if the strike does not materialise," he told the Business Times.

"Those who are holding gold should stick with it."

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