January 27, 2011 / 8:09 PM / 7 years ago

WEALTH MANAGER-Canada advisers think gold has lost its luster

* Survey shows a big drop in bullish sentiment for gold

* Advisers prefer large caps, energy, financials in Q1

By John McCrank

TORONTO, Jan 27 (Reuters) - The road to higher returns in the first quarter is not paved with gold, according to most Canadian investment advisers, many of whom see more value in energy and financial stocks.

The fading allure of bullion and gold stocks is tied to rising prospects for the global economy, said Howard Atkinson, the president of BetaPro Management Inc, which puts out a quarterly survey on adviser sentiment.

The latest results showed a big drop in expectations for gold following two years of consistently strong sentiment. For the first quarter, 33 percent of advisers said they were bullion bulls, down from 64 percent in the fourth quarter.

Bullishness toward the S&P/TSX Global Gold Index fell to 33 percent from 64 percent. The index rose more than 25 percent last year.

“They’re taking money off the table,” said Atkinson. “They’re suggesting, ‘Let’s lock in some profits here.’ I don’t think they’re saying that gold is going to head down - they’re just saying it’s not going to run up as much as it did in the last few quarters.”

Safe-haven buying fueled by a tenuous economic recovery helped push the price of gold XAU= to a record $1,430 an ounce in December, with a gain of about 30 percent on the year.

That was before recent U.S. economic data that has signaled an economy on the mend, sending gold is down around 7 percent so far this year. Many advisers and their clients are looking elsewhere for gains.

“I find the valuations are a lot nicer on some U.S. dividend paying companies than gold right now,” said Stephen Verbeek, an adviser at RBC Dominion Securities in Hamilton, Ontario.

He said that lately he’s been fielding more calls from clients who up until recently wanted no exposure to equities but who now want in.

In the survey of more than 100 Canadian investment advisers, conducted between Jan. 5 and Jan. 14., 62 percent expected growth on the S&P/TSX 60; 63 percent were eyeing gains on the S&P 500 Index; and 67 percent were bullish on emerging market stocks, represented by the MSCI Emerging Markets Index.

Bullish sentiment toward financial stocks, represented by the S&P/TSX Financials Index, was up at 57 percent from 47 percent in the previous quarter.

Looking to the S&P/TSX Energy Index, 73 percent of advisers were expecting stronger returns in the first quarter, while 61 percent liked the prospects for crude oil.

“It’s all tied to better forecasts for growth, which is going to help U.S. stocks, energy stocks, as well as other equities, and means less need for the protection of gold,” said Atkinson.

Of course, there are still advisers who like gold and who see its recent pullback as a buying opportunity.

Jaime Carrasco, an investment adviser at Macquarie Private Wealth in Toronto, said that with the U.S., Europe, and Japan printing spectacular amounts of money to stimulate growth, gold will benefit as currencies continue to weaken.

“Last year the U.S. spent $5 trillion to generate C$600 billion in GDP,” he said. “That’s like me spending $500,000 to get $60,000 to live on -- that policy cannot sustain itself, because the sickness is too much debt in the system and the cure is to generate more debt -- at some point, that’s going to fall apart.”

$1=99 Canadian cents Reporting by John McCrank; Editing by Frank McGurty

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