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As Gold Slides, Some Seek New Havens


It had an amazing year, but investors worried that gold has lost its luster are quietly looking for a new alternative to protect their portfolio.

After hitting record highs above $1,900 an ounce in September, gold prices tumbled in recent months to about $1,600 an ounce. Today, it ended the year at $1,566 an ounce, up 2% from yesterday but still down 17% from its record high settle in late August. Much of the concern, analysts say, has had little to do with gold itself, but the European debt crisis, which scared investors into selling gold and other assets so they could store up on more cash.  Even some big names like George Soros say gold now is nearing the end of its run.

The metal, of course, has served as a hedge in many people’s portfolio against financial crises. So many advisers are looking for new stalwarts for 2012, including other commodities and short term bonds. Bobbie Munroe, a financial planner in Atlanta says people looking for stability should turn to short term bonds, which shouldn’t fluctuate in price as much as gold. Treasurys in particular, she says, should benefit if the crisis in Europe deteriorates. “There are not many places to go for safety,” says Munroe.

Adrian Cronje, chief investment officer of Balentine, an investment advisory firm in Atlanta, recommends investors who are worried about gold’s tumble move money into other commodities, such as energy and agriculture stocks, which would also protect portfolios against inflation. He also recommends they hold local-currency emerging market bonds, which would offer another way to diversify their currency exposure, one of the reasons he is using gold today.

Still many gold bugs stand by the precious metal as a way to buffer their investments from the European debt crisis and the threat of inflation. For instance, Chris Kichurchak, vice president of Strategic Wealth Partners, a financial planning firm in Seven Hills, Ohio, says gold should do well if there is further quantitative easing in Europe because that would cause the euro to weaken. For similar reasons, Cronje still allocates 5% to 10% of his clients’ portfolios to gold today. The metal, he says, offers a hedge against those inflation risks. Even with the recent price decline, gold should bounce back if quantitative easing takes place, he says.


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    • Such a small think. ;-) But such a great idea

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    • Gold today, butter tomorrow. One has to ask themselves just how much sense this makes. The smart money people know that if they have used asset allocation all along they need not run to the exits to sell gold or edges for that matter. Run scared, run poor!

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