Prospects for gold are bright, and investors should overweight their holdings of gold and gold equities to reap the benefits, a panel of gold industry experts said on Tuesday.

At a time when nearly all sectors are being hit by the economic downturn, gold has held up fairly well, according to Paul Burchell, senior analyst and head of mining research at Dundee Securities Inc. He expects gold companies to report strong first quarter financial results, which will reward investors.

“We suspect that this upcoming quarter, the first quarter results are going to be pretty good,” Burchell said.

Dundee expects the price of gold to rise going forward, and according to Burchell, investors will generate greater returns by investing in gold equities than by holding physical gold.

Ian Telfer, chairman of Goldcorp Inc., agreed. He said investors who are bullish on the price of gold should invest in gold stocks for more generous returns.

“Equities are in a pattern that usually outperforms the commodity over time,” he said, but warned that during downturns, equities tend to involve greater downside risk.

He encourages investors to hold an over-concentration in both physical gold and gold equities in the current environment.

“I view the future as extremely bright,” he said.

James Turk, founder and chairman of GoldMoney – a company that lets investors buy physical gold and silver – is also bullish on gold prices. During the current market volatility and uncertainty, he encourages investors to boost their holdings of physical gold as a safe investment with no counterparty risk.

“I think it’s prudent to have significantly more in bullion at this moment in time,” Turk said.

In particular, those seeking safe investment vehicles for retirement savings should consider holding as much as 25% to 30% of their portfolio in gold, according to Turk.

He said holding physical gold should not be viewed as an investment, but as a replacement for cash and a means to preserve purchasing power.

“Gold is money,” Turk said. “Don’t look at it as an investment. Look at its usefulness, which is basically no counterparty risk, preserve purchasing power over long periods of time.”

Telfer pointed out that the growth of exchange-traded funds has been positive for gold since they’ve made investments in the precious metal a much more accessible investment option for individual investors.

“ETFs are great for the industry, great for the gold price,” he said.

But Turk warned that investments in ETFs should not be considered a replacement for owning physical gold, since the investments carry counterparty risk.

“The ETF is just a paper representation for gold, so don’t assume that it’s really gold backing it,” he said.

Burchell warned that there are potential downsides to gold investments in the near future, including the possibility that a rally in equities could deflate the price of gold, and the ongoing recession.

“Recessions are not good times for any commodities, including gold,” he said.

Still, Dundee Investments expects the price of gold to rise going forward, averaging roughly US$950 an ounce in 2009 and US$1,050 an ounce in 2010.