As gold continues to climb through its fifth record high this month New Zealand investors are being cautioned to consider the volatility of the New Zealand dollar which could potentially wipe out any gains.
Spot gold prices on the Comex division of the New York stock exchange hit an overnight high of $US1117 ($NZ1511), before settling down slightly while spot gold trading on the London Metals Exchange saw it hit a high of $US1114.75.
The weakened United States dollar has underpinned not only the price of gold, but the strength of the New Zealand dollar in recent weeks which, for much of this week, has been trading around US74c.
Craigs Investment Partners broker Peter McIntyre said that for the average "mom and pop" investor it was difficult to obtain access to hedging facilities against currency fluctuations and the strength of the kiwi "could be seriously eroding any gains" they think might be made on gold.
"In some respects, if average investors want exposure to gold they would be better to go to the shares of gold producers. Producers have the ability to ramp up production [and sell] when gold prices are high and will generally have hedging priced in," Mr McIntyre said.
Based on $US1117 for an ounce of gold, if investors purchased it at an exchange rate of US50c it would cost $NZ2234.
However, if selling at $US1117 per ounce while at US75c it would be worth $NZ1489 - a 33% loss.
Mr McIntyre reiterated concerns sounded earlier in the week, when gold was hitting earlier records, that with global equity markets at present showing plenty of strength it was unusual for gold to be trending up at the same time.
While many investors were treating gold as the historical safe haven and hedge against inflation, including increased sales to governments wary of weakness in several major currencies, Mr McIntyre said the record gold prices may also be reflecting the formation of other asset bubbles.
Because of the global multi-government fiscal stimulus injected into the ailing finance sector, there was mounting concern that equities and property could again become overvalued, Mr McIntyre said.
