Gold’s traditional role as a store of wealth has been usurped by contemporary art and apartments in cities such as New York and London, according to Laurence D. Fink, head of the world’s biggest asset manager.
“Historically gold was a great instrument for storing of wealth,” the chairman of BlackRock Inc. said at a conference in Singapore on Tuesday. “Gold has lost its lustre and there’s other mechanisms in which you can store wealth that are inflation-adjusted.”
Over the centuries, bullion traditionally lured demand as a protection of wealth during crises, including conflicts and periods of inflation. Prices posted the first back-to-back annual drop last year since 2000 as investor holdings in exchange-traded products contracted, global equities rallied and the dollar climbed on prospects for higher U.S. interest rates. Since peaking in 2011, it’s dropped about 38 per cent.
“The two greatest stores of wealth internationally today is contemporary art….. and I don’t mean that as a joke, I mean that as a serious asset class,” said Fink. “And two, the other store of wealth today is apartments in Manhattan, apartments in Vancouver, in London.”
Bullion for immediate delivery, which rallied to as much as US$1,921.17 an ounce in September 2011, traded at $1,198.82 at 6:30 a.m. in New York, according to Bloomberg generic pricing. It’s risen about 1.2 per cent this year after losing 1.4 per cent in 2014 and tumbling 28 per cent in 2013.
‘Easier to Own’
Holdings in gold-backed ETFs totaled 1,621.7 metric tons as of Monday, 1.5 per cent bigger this year after contracting 9.3 per cent in 2014, according to data compiled by Bloomberg. The funds trade like shares, enabling investors to own bullion without taking physical delivery of it.
“The advent of ETFs for gold made it much easier to own gold and it really democratizes gold,” Fink said at the 2015 Credit Suisse Megatrends conference. “I don’t believe people believe gold is a great store of wealth today.”
The median sale price for existing condos in Manhattan jumped to a six-year high of $1.3 million in the first quarter, driven up by buyers seeking alternatives to out-of-reach new developments, according to Corcoran Group, a brokerage. The average home price in Greater Vancouver reached$891,652 in March. In the U.K., asking prices for property climbed to a record in April as values in London rose 2.5 percent, Rightmove Plc said on Monday.
“It’s become much more accessible for global families worldwide to store wealth outside their country,” said Fink. “And they don’t have to own gold.”
Jonathan Burgos and Netty Ismail, Bloomberg News | April 21, 2015 3:03 PM ET