Gold Can Keep Setting Records, Kleinwort Benson's Thompson Tells Clients

Gold, up 27 percent in the past year, can advance to new records and investors should prepare to buy more, according to Kleinwort Benson, a manager of money for the wealthy.

Andrew Thompson, head of advisory portfolio management at Kleinwort Benson in London, is telling his clients to stick with existing holdings of the metal and increase them once prices drop, he said in an interview. Thompson’s customers have a combined 400 million pounds ($622 million) of assets.

“It’s clear blue sky from here,” Thompson said by telephone. “Gold has the potential to be a bubble. It could go a great deal higher first. It won’t go on forever, but it has the capacity to go on for longer.”

Prices today advanced to a record for a fifth straight day. Bullion has gained as investors seek safety and assets that can give protection against possible inflation after governments pumped billions of dollars, euros and pounds into ailing economies the past two years.

Gold has advanced 63 percent since Lehman Brothers Holdings Inc. filed for bankruptcy on Sept. 15, 2008. That compares with total returns of 0.2 percent for the MSCI World Index, a benchmark for stocks, and 11.7 percent for an index of U.S. bonds compiled by Bloomberg and the European Federation of Financial Analysts Societies.

10th Full-Year Climb

“People are terrified about inflation, and it’s a good tool,” Thompson said of bullion. “It’s one of the very few asset classes trading at an all-time high.”

Gold for immediately delivery traded at $1,291.05 an ounce at 12:31 p.m. in London after touching $1,295. The metal is headed for a 10th consecutive annual gain, the longest winning streak since at least 1920.

Thompson, 40, caters to 250 customers who each typically have between 500,000 pounds and 10 million pounds of assets. All clients are advised to use “trailing stops,” which allow them to take profit once gold hits a certain level.

Demand for bullion from emerging markets also will help to keep the precious metal gaining in value, Jeremy Beckwith, chief investment officer at Kleinwort Benson, said in an interview in Edinburgh last week.

“The countries catching up fast, like China, India and the Middle East, are those that have been historically inclined to buy gold, so there is a good demand story,” Beckwith said. “We are still positive.”

To contact the reporter on this story: Rodney Jefferson in Edinburgh at r.jefferson@bloomberg.net

To contact the editor responsible for this story: Tim Quinson at tquinson@bloomberg.net

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