Interview: Gold is Not a Currency, Will Face Pressure When Global Economy Improves--Miguel Perez-Santalla

Tucson -- (Kitco News) --Gold is not a currency and will face strong downward pressure when the global economy improves, according to Miguel Perez-Santalla, vice president of marketing for Heraeus.

Perez-Santalla, interviewed on the sidelines of the 34th International Precious Metals Institute Conference here, said gold should be bought for its normal value use and not as a hedge against the end of the world.

Perez-Santalla said gold is a beautiful commodity and in great demand and should be used for its beauty and its properties. “You should invest in gold in the sense you need to hedge something of value that will always have value,” he said. “But if you are looking for the end-of-the-world savings, that is not going to be the thing to help you.”

Gold is thought of as a currency because of its history, but it is not, he said, and “it will drop and it will lose its value to the point where the value is held because of the demand for jewellery and whatever uses at hand.”

Perez-Santalla said gold is much more liquid than the other metals so people are attracted to it, but it is still a commodity.
“When problems come—if they come and God willing they will not-- gold will not be the thing you want, he said. “You can’t really do anything with it.  How are you going to trade for commodities and things you really need?”

Perez-Santalla said when people put excessive amounts of money into gold, they “are actually hurting” the economy overall. “If the globe continues to invest heavily into gold, it’s actually shooting yourself in the foot,” he said.

“You’re causing the same problem. Illiquidity of money is what hurts economies.”

He said gold prices have been buoyed by heavy investment demand as investors bail out of the Euro and out of the stock market because of the weak economy and sovereign debt concerns.
“The second the world economy starts to improve, you will see liquidation across the board and gold will drop,” said Perez-Santalla.”When that day comes, when the economy starts to improve, that is another situation.”

Asked about recent reports on Iran buying gold and selling Euros, Perez-Santalla said their big concern was the currency, not just interest in gold. The Iranians were concerned about the Euro holding together because of the European debt problems.
“Obviously, gold would be a good hedge against that,” he said. “Maybe they didn’t buy dollars because they don’t want to support the dollar. Does that mean gold is a currency? No, that is the vehicle they chose to use to store value for a short term.”

By Daniela Cambone, contributing to Kitco News;dcambone@kitco.com

Terry Wooten contributed to this story.

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Daniela Cambone by Daniela Cambone
Senior Reporter, Kitco News