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Should Apple Inc. Buy Gold?

June 27, 2012320 view(s)

Lately, some commentators in the media have begun to speculate on whether or not large corporations with high levels of cash assets should consider a move to buy gold as a hedge against macroeconomic instabilities. The global market will always be volatile to some extent. Having precious metals in a portfolio can help make the portfolio less vulnerable to that volatility. While this is not a traditional move, voices in the media are wondering whether it might be a smart idea. Gold prices have continued to rise in 2012, with records expected to be broken for prices in precious metals like gold.

One example cited has been Apple, the maker of both the iPhone and the wildly popular iPad digital tablet device. A columnist at Wall Street Cheat Sheet posed the question regarding Apple one day making a move to buy gold, pointing out that the tech giant had nearly $74 billion in salable assets available. This is more than what's held in operating cash by the Treasury of the United States. This position, he posited, could potentially allow Apple to gobble a significant portion of the world's available gold. That would put those already involved in gold investing in a very good position themselves while also sending the yellow metal's prices that much higher.

In 2011, a Morgan Stanley analyst, Katy Huberty, told the media that Apple's cash flows looked as if they would be far more than its cash needs. This would put the company in an excellent position to invest further and, as one columnist pointed out, gold is also a material that is used in producing digital devices. It would be useful for a tech company to have available should gold prices soar.

Speaking of its performance last year, Wall Street Cheat Sheet reported, "In addition to a blow-out earnings number, Apple’s cash position has grown to new earth-shattering records. Apple generated a cash flow of $17.5 billion in the quarter, and finished 2011 with a whopping $97.6 billion in cash and equivalents."

At current prices, this would be over 1,900 tons of gold, a significant store by anyone's standards and definitely enough to make prices change and the press take note. If this sounds incredible, keep in mind that Zero Hedge reported that according to its analysis, Apple has more cash than countries as large as Syria or Iraq and enough to make it the equivalent of the world's 58th largest national economy. These are impressive figures. While corporations may not take to buying gold any time in the near future, it could certainly make a massive difference if they did, which is the point that today's commentators are trying to make.

Part of the incentive, for many of those posing this potential scenario of large corporations purchasing gold, is that profits could be used to pay investors a dividend. This means that investors would have a safer stock choice if the company held precious metals that do not respond to macroeconomic changes in the same way that currencies do.

Though we may never see such a move happen, it is fascinating to think of how major corporations like Apple holding gold could change the way the market functions. The impact of many corporations following suit would certainly shake things up on a global level, experts say.

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