Gold and Commodities - An alternate investment option

Investing money in different asset classes diversifies the risk of the investor. Hence, if for example, the stock markets are undergoing a bear phase, the other assets such as precious metals maybe witnessing a bull run, which provides a balanced portfolio, informed Mr. Framroze Pochara, CEO, the Dubai Gold and Commodities Exchange (DGCX), the world's newest online commodities derivatives exchange. Many commodities such as copper, platinum and oil have hit their life time high prices recently. Gold and silver touched their 25 and 26 year highs respectively in May 2006

Speaking on 'Gold - an alternative investment opportunity' at the 4th GCC Stock Market Summit at Burj Al Arab, Pochara added that investors should consider investing a part of their surplus monies into commodity markets specially when the prices of commodities are on an up swing.

As an example he said "If you had invested US$10000 in gold futures in 1999, your initial investment would have grown 122 per cent to $22205 by June30, 2006. While if the same $10000 was invested in S&P 500 index, the gain would have been just 1.16% (S&P 500 rose from 10000 in 1999 to 10162 on June 30, 2006). This shows that gold and other commodities could even outperform the stock markets.

Mr. Pochara further explained that it is much easier to take a view on commodities since they are internationally traded and depend on macros economic factors such as demand and supply for the commodity in question. On the other hand to take view on the shares of a particular company, one needs to study the financials of the company, how the relevant industry is performing, the management of the company and many other factors.

"The stunning success of DGCX in Dubai even before it has completed one year in business is the most telling evidence that investors are exploring alternate investment opportunities in gold, currencies and other commodities to park their funds." he concluded.