Northwestern Mutual Makes First Gold Buy in 152 Years

Northwestern Mutual Makes First Gold Buy in 152 Years



June 1 (Bloomberg) -- Northwestern Mutual Life Insurance Co., 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. Gold gained 10 percent last month, the most since November. The commodity has more than tripled since 2000, rising for eight straight years. Gold futures for August delivery slipped 30 cents to $980 at 11:47 a.m. in New York.

“The downside risk is limited, but the upside is large,” Zore said. “We have stocks in our portfolio that lost 95 percent.” Gold “is not going down to $90.”

Policyholder owned Northwestern Mutual, based in Milwaukee, ranks thirds by 2008 life insurance premiums according to data from the National Association of Insurance Commissioners. The data excludes annuities.



http://www.bloomberg.com/apps/news?pid=20601087&sid=ajf0L9wTPq6Y&refer=home

 

My two cents would say they're too late to this party. Gold will likely see some upside still, but I don't think there is enough potential to justify a $400 million commitment at this level.

 

My dad back in the 70s said the same thing after gold went from 35 to 100 per ounce. He also thought he had missed the party. Little did he know it would jump another 800% shortly.

 

It is certainly possible. But I personally believe the risk/reward on the bet these guys made right here is not very favorable.