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Insurance giant bets on gold -- for the first time in 152 years

June 1, 2009 | 12:39 pm

Gold bugs will love the endorsement the metal got today from private insurance giant Northwestern Mutual Life Insurance Co.

From Bloomberg News:

Northwestern, the third-largest U.S. life insurer by 2008 sales, has bought gold for the first time in 152 years to hedge against further asset declines.

"Gold just seems to make sense; it’s a store of value," Chief Executive Officer Edward Zore said in an interview following his comments at a conference hosted by Standard & Poor’s in Brooklyn. "In the Depression, gold did very, very well."

Northwestern Mutual has accumulated about $400 million in gold, and Zore said the price could double or even rise fivefold if the economy continues to weaken.

Today, however, the metal is on the sidelines as stocks soar in the wake of economic data that were better than expected. Gold futures in New York were trading around $978 an ounce at about 12:25 p.m. PDT, off slightly from $978.80 on Friday -- which was the highest price since Feb. 23.

Gold and other commodities have surged in recent weeks, although many buyers seem to be motivated by expectations of an economic turnaround, and potentially higher inflation, rather than by Zore’s concerns about the economy going back into the tank.

The slumping dollar also is making gold look more attractive as a wealth-preserver. The dollar is broadly lower again today.

Zore made an interesting point about the risk he perceives in gold versus in the stock market: "The downside risk is limited, but the upside is large," he told Bloomberg. "We have stocks in our portfolio that lost 95%." Gold "is not going down to $90."

-- Tom Petruno