Standard Chartered Recommends Gold, Silver for Top Banking Clients

May 20th, 2009

By Peter Cooper

Standard Chartered is including gold and silver as one of four main recommendations to its private banking clients, according to a presentation by chief investment strategist, Lim Say Boon, in Dubai today.

The UK’s second largest bank by market capitalization has been winning clients in a flight to quality from its crashing rivals, and this global trend has also been evident in the Middle East.

Clients are being recommended to purchase gold and silver on price pull backs as the precious metals have a low correlation to traditional asset classes. The bank will recommend on different ways to invest in the metals.

Portfolio strategy

Meanwhile, the relatively new regional private bank is telling clients to switch away from the US dollar in the second half of this year, buy commodities like oil, diversify into high quality corporate and emerging market sovereign debt, and cost-average their stock investments.

However, Mr. Boon cautioned clients against chasing stock markets at this stage after the big rally from the March 6th low. He thought financial markets might be getting ahead of the economic news which is still ‘terrible’, such as the 15 per cent slump in Japanese GDP announced today.

‘March may have been the bottom for stock markets but markets do not move in a straight line. We are advising clients to buy on further weakness but not to chase the market up,’ he said.

Not the Great Depression

His view is that the current financial crisis is ‘not the same size’ as the Great Depression of the 1930s and that the challenges are very different to the 1970s Oil Shock when interest rates of 20 per cent compared with near zero rates now.

‘We can see major Japanese manufacturers trading below book value,’ he noted . ‘We can see that investment grade debt spreads will narrow. And when the economy recovers, perhaps in a year, oil will cost much more.’

However, Mr Boon agrees that there is presently a disjunct between renewed confidence by investors and the true condition of the global economy and its recovery prospects. Between those two factors lies scope for considerable investor disappointment, and more than enough reason to hedge a portfolio with precious metals.

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