New Record Highs for Gold Prompt the Question “Is Gold in a Bubble?”, But Investors Should Keep Long Term Focus, Says Goldline International CEO Scott Carter

SANTA MONICA, Calif.--(BUSINESS WIRE)--Investors sent gold to yet another record high today following S&P’s downgrade of the U.S. credit rating, prompting some investors to worry that gold’s rise could represent a “bubble.” While that question may feel natural considering the current media focus on gold, it may not be the important or correct one for investors to focus on, according to Scott Carter, CEO of Goldline International, a leading source of physical precious metals.

“Trying to time the market for gold – for the bottom or the top – is risky on a number of levels”

“Trying to time the market for gold – for the bottom or the top – is risky on a number of levels,” said Mr. Carter. “There are many factors affecting the world and domestic economies, including the U.S. credit downgrade, volatile equity markets and mounting sovereign debt, that suggest gold may continue to gain value."

“The reality is that physical gold is best viewed as part of a long-term diversification strategy with investors prepared to hold gold for three- to five-years or even five- to 10-years. It makes sense for investors to consider physical gold and other precious metals when they want to diversify with a tangible asset that can act as a potential hedge in times of inflation, deflation and currency weakness. However, we believe it’s smart to have no more than five to 20 percent of an investment portfolio in precious metals,” he added.

Instead of speculating on the direction of the price of gold, Mr. Carter believes investors should focus on more fundamental questions, such as…

What variables and factors should I really think about when I consider buying gold?

“Rather than attempting to forecast global calamities and dislocations, many prudent investors choose to acquire and hold gold so that, when these economic crises arise (as they have now), they own an asset which can react appropriately and, in some cases, counter-cyclically to other assets. At the same time, investors should understand that gold and other precious metals are long-term assets and should only comprise a modest portion of an overall portfolio which includes other investment classes. Gold is not a ‘bet the ranch’ investment strategy; it makes sense as one element in a diversified portfolio,” Carter said.

If I’m considering gold, what elements of today’s macroeconomic environment should I think about?

“The factors to be concerned about – and those that make gold a sensible part of a diversified portfolio – happen to be front-and-center issues in the news today. They include the declining dollar; the formidable sovereign debt challenges many developed countries are facing; inflation risks, and other variables that are making the economy shaky. Historically, gold has been a safe haven asset that many investors consider acquiring in unstable times,” Mr. Carter said.

Is the current increase in the price of gold similar to the bubble in the 1980s?

“Some people rush to compare the renewed interest in gold to the gold bubble, but the underlying fundamentals driving the price in gold today – sovereign debt, a weakening dollar and a slowly recovering global economy – are not the same as in 1980. To put things in perspective, gold has not even reached its inflation-adjusted high from 1980 (over $2,200 in today’s dollars) and gold still represents a very small amount of investors’ portfolios. We have seen gold increase in value for more than ten years with appropriate corrections throughout this time period to reflect market demands and economic factors. Further, today’s economy is a global economy with sovereign debt and global inflation having a significant impact on the domestic economy.”

Is all this talk about a return to the gold standard a reason to invest in gold?

“There are several prominent voices calling for gold to be part of a new reserve currency to replace the dollar. We’ve also heard others who call for the United States to return to the gold standard. Whether or not this eventually comes to pass, we suggest investors look at the reasons why this discussion is taking place at all: gold’s status as a safe haven asset; a potential hedge against inflation; and the historic role of gold in fiscal restraint and discipline,” he said.

Mr. Carter is available for a discussion, or to author a byline article. For more information or to arrange a conversation, please contact Frank Lentini at Sommerfield Communications, Inc. at 212-255-8386 or lentini@sommerfield.com.

About Goldline International

Goldline International is one of the largest companies providing physical precious metals to collectors and investors in the United States. Founded in 1960, Goldline is headquartered in Santa Monica, CA with over 300 employees and annual sales exceeding $500 million. In 2010, Goldline was recognized by Inc. Magazine as #53 in the top 100 largest companies by revenue and by the LA Business Journal as the fastest growing private company in Los Angeles. For more information about the company or how to buy gold, please call 800-827-4653, visit goldline.com and follow Goldline on facebook.com/goldline or twitter.com/goldline.