Despite the importance of gold as a hedge in volatile markets, Interaudi Bank is considering dropping it as an investment option for its roster of mainly high-net-worth investors.
Joseph G. Audi, the New York-based bank's founder, president, and chief executive officer, said it decided to add gold to its lineup last year on recommendation from an economist.
"We were very bullish last year, but we're not sure if we're going to keep" gold as an investment product, he said in an interview Wednesday at the New York Institutional Gold Conference and Diamond Expo. He would not say why the bank was considering dropping the product.
Mr. Audi was one of the roughly 3,500 attendees at the conference, held Wednesday and Thursday in New York at the Marriott Marquis in Times Square. The annual conference draws more than 200 gold and natural resource companies, and its presentations are by the industry's top fund managers, analysts, and investors.
Gold is typically bought by individual high-net-worth investors, Mr. Audi noted. It has a historical element and is still popular with some Interaudi clients, he said. "It's one of the oldest investment tools."
The appeal for many is tangibility, Mr. Audi said. Investors "can have something in their hand instead of a stock" or mutual fund. The commodity remains very popular as an investment tool in regions including Europe, South America, Asia, and the Middle East, he said.
Interaudi Bank, a private outfit, targets those with assets of $100,000 to $1 million. It does not actively market gold as an investment option, and advises clients to invest no more than 10%-15% of their assets in gold.
"It should only be a small part of their overall assets," Mr. Audi said
Offering gold to customers has no downside, he said, and it represents another choice for Interaudi customers. "We want to offer products we think are reasonable."
Geoff Bobroff, an asset management consultant with Bobroff Consulting Inc. in East Greenwich, R.I., said that since such a small segment of the population views gold as an investment tool, he is unsure how banks benefit from offering it.
Mr. Bobroff said that interest in the product has fluctuated, and that now may be a good time for investors to buy gold. "Unless you anticipate a huge run-up, most consumers buy gold coins," he said.
Though it does not give a return, gold is seen as a hedge in uncertain times, Mr. Audi said, and that appears to be the biggest advantage for consumers.
But he said investors have to keep in mind that while gold "is relatively low in price," it "is still risky."
Gold closed Thursday at $388.90 per troy ounce on the New York Mercantile Exchange, down 3.6%.
Interaudi Bank, founded as Bank Audi USA in 1983 as a state-chartered commercial bank in New York, has clients throughout North and South America, Europe, and the Middle East but does most of its business in the United States, largely in the New York City area, California, Florida, and Texas.
It changed its name last year and opened its first Miami office in May 2003 to better serve customers from Latin America, including Mexico, Brazil, and Argentina.
The Miami branch was converted from a trust company called Schroder Trust Bank that Mr. Audi's company bought in October 2002. It bought Schroder because of a Florida law that prohibits out-of-state banks from opening branches there without a state charter.
The Lebanese-born Mr. Audi had been the CEO of a Swiss bank before founding what would become Interaudi Bank.
