JUNE 4, 2010
The Jewish Voice
BISINESS
PAGE 19
Should Gold be Part of Your Portfolio? BY ROBERT KIRSCHNER AND GERALD HARRIS For years gold was the stepchild of the investment world. Not anymore. Today, individual investors are purchasing gold enthusiastically. So too are billionaires, banks, money managers and even some of the most respected analysts on The Street. To the surprise of many, owning gold has become not just fashionable but also respectable.
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here are many reasons gold is in such great demand. Some believe that owning the yellow metal offers security in the event of political shock, economic downturn, and even if paper money fails and becomes worth little or nothing. Others believe that gold will retain its value over the long term, even during periods of sharply higher inflation, rising def icits, and major bankruptcies. There is no question that the price of gold has been increasing steadily. Gold traded as low as $273/ounce in 2000. But by 2005, the price had increased to $513/ounce. And in 2008 an ounce of gold cost $865. The price is even higher today. Gold has been trading over $1,000 an ounce since October 2009, and has been over $1,100 for several consecutive weeks. Some believe there may be more gains ahead. “We are on the threshold of a major upward move in gold and all things gold,” says James Sinclair, an expert on gold who founded Jim Sinclair's MineSet in 2003.
How to Buy Gold Investors who want to purchase gold can do so in several ways. One is to buying shares in mining companies. Some of these are very large multi-billion dollar f irms that produce great quantities of gold. Barrick Gold (ticker symbol ABX) is one such company. Barrick is an international gold f irm with mines and projects in the U.S., Canada, South America, Australia and Africa. By contrast, other miners are tiny f irms that are just exploring for gold. Mining shares can be very volatile. Shareholders are faced with many of the risks of owning shares in any public company, but they also need to be aware of risks specif ic to miners, such as depletion of resources at the mine and political risks in companies based overseas. Mining shares often but not always move in the direction of gold. At times they have generated huge prof its for shareholders. Another way of owning gold is by buying ETFs. This investment vehicle, which is relatively new, is constructed to closely follow changes in the price of gold. ETFs trade like stocks, so they can be bought and sold easily. Some ETFs like "GLD" track the price of gold. Others ETFs move parallel to the price of gold but by twice the percentage -- a very good feeling when the market moves the way the hopes it will. However, losses can mount quickly should the market moves against him or her.
Is There Enough Gold to go Around? Like all commodities and products, the price of gold is affected by supply and demand. Currently demand for gold is increasing both among small
investors and powerful central banks. For example, China, the world’s largest producer of gold, purchased signif icant amounts of the precious metal when the price was in the $900s. The Russian Central Bank recently added 400,000 ounces to its coffers, bringing the total to some 19 million ounces. And the Reserve Bank of India has purchased 200 metric tons from the International Monetary Fund. This one purchase, by itself, was so large that it was equivalent to around 8 percent of all the gold mined in a year. Some believe the supply of gold is declining. Tye Burt, CEO of Kinross Gold Corp., Canada’s third largest producer, recently said, “Globally production has been in decline since the peak of 81 million ounces (produced) in 2001, compared to 77 million ounces in 2008, and we may see that decline continuing long term.” John Paulson is an exceptionally successful hedge fund manager. In 2007 he made what has been described as "the greatest trade in f inancial history." Paulson made a $15 billion prof it for his f irm in 2007, and followed up with a $5 billion prof it in 2008. In recent months he has been increasing his positions in several investments: one of those is gold. Jim Rogers, chairman of Rogers Holdings and a fabulously successful investor, believes that at some point gold may consolidate some of the strong gains it’s made in recent years. Despite this, he calls the U.S. dollar a “flawed” currency and points out weaknesses in other currencies as well. As a result, Rogers is bullish on the long term prospects for gold. He also sees opportunity in the price of silver. Historically the ratio between the price of gold and silver was about 20:1. But these days the ratio is about 60:1. Rogers believes this ratio may move back to historical levels. As a result, silver may potentially increase by an even greater percentage than gold. "How many items sell today at a third of their all time high?" he asks. On April 22nd, Marc Faber, a highly regarded money manager, told CNBC that investors should gradually accumulate physical gold and silver. "Paper money (will go) down relative to precious metals," he said. Of course, just because gold has been a strong performer in recent years is no guarantee that it will continue to do so. Investors should always consult with an expert before making an investment decision. FOR ADDITIONAL INFORMATION CONTACT: Robert Kirschner Walnut Securities Tel. (212) 769- 3411
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Universal Life or Whole Life? YOU HAVE CHOICES IN LIFE BY ROB PERELMUTER, State Farm® Agent
When looking for a new car, you have choices between numerous models, manufacturers and colors. The same can be said for life insurance. Your selection will depend on a number of factors, but there is more than likely an option to fit your needs.
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wo life insurance products you may consider are Universal Life and Whole Life. Each offers the protection of a death benefit that will pass along to your loved ones tax-free. But beyond that, each policy also allows for tax-deferred growth over your lifetime The cash value of these policies can be an important source of supplemental cash for a variety of needs. While any withdrawals will reduce the cash value or death benef it of your policy and should be done only after careful consideration, there are no restrictions on how proceeds may be used. But, before you start thinking these products are the same, you will f ind some important differences between them. Any comparisons between Universal and Whole Life policies should include discussions about premium and benef its. The premiums for each policy differ in that Whole Life offers a premium amount that will not change throughout your lifetime. A Universal Life premium has some flexibility after an initial
minimum amount is paid. Universal Life premiums can change to f it various f inancial situations but the policy does not have the same premium guarantees found in a Whole Life policy. A Universal Life policy offers a death benef it that may be increased or decreased depending on your needs. The death benef it of a Whole Life policy is f ixed and guaranteed as long as premiums, so you won’t need to worry about the death benef it for your benef iciaries. Whether you are looking for the flexibility of a Universal Life policy or the guarantees offered by Whole Life, you have options to suit your needs. Talk to your insurance agent to f ind a policy with the features you want. e-mail: Rob@RobAgency.com, Visit on the web at www.RobAgency.com