Posts Tagged ‘Bullionvault’
Dollar Weakness “Creating Gold Demand” after Greek Deal, Time for American Austerity “Is Not Now” says White House
London Gold Market Report
SPOT MARKET gold prices touched $1733 per ounce Monday morning – 0.5% up on last week’s close – as stock markets, commodities and the Euro all rallied following Greece’s vote in favor of new austerity measures.
Silver prices meantime hovered around $33.90 per ounce – 0.8% up on the end of last week – while government bond prices dipped and the Dollar fell on the currency markets.
“The weakness in the Dollar…creates a bit of demand for gold,” reckons Bernard Sin, head of currency and metal dealing at Swiss precious metals refiner MKS.
By Monday lunchtime, Euro-denominated gold prices were roughly where they ended last week, at around €42,000 per kilo (€1306 per ounce).
Greek lawmakers last night approved a fresh austerity package, including public sector layoffs, minimum wage reduction and pension cuts. A reported 80,000 people took to the streets in protest, while press reports said up to 30 buildings were firebombed.
Antonis Samaras, leader of the New Democracy party and widely tipped as Greece’s next prime minister, expelled 21 members from his party for voting against the measures. Former prime minister George Papandreou, leader of the socialist Pasok party, also expelled members who did not support the measures.
Eurozone finance ministers are due to meet on Wednesday to review the new agreement, and potentially sign off Greece’s €130 billion second bailout. This in turn should pave the way for a deal with Greece’s private creditors to reduce the country’s debt burden, as well as stave off a default on March 20 when €14.5 billion of 3-Year Greek bonds mature.
“The government may yet find that approving the new measures…proves to be far less of a challenge than implementing them in the months ahead,” reckons one gold bullion dealer here in London.
“We are still looking for more measures out of Europe before we see a sustainable risk rally,” adds Ong Yi Ling at Phillip Futures in Singapore, who expects gold prices to hit resistance at $1760 per ounce.
“That will be the first resistance and the second one is at about the $1800 level. For gold to break the $1800 level, we need more measures, I would say.”
Here in the UK, the latest Bank of England figures relating to Project Merlin – the agreement between the UK government and British banks aimed at promoting lending to business – show that banks lent £214.9 billion overall to business in 2011, against a target of £190 billion.
However, the target for smaller businesses was missed, with £74.9 billion lent versus a target of £76 billion. The final quarter of last year saw a 3% drop in net lending.
“The Merlin targets have failed,” says Andrew Cave, head of external affairs at the Federation of Small Businesses.
“Talking to our members, 30% of them say they missed a growth opportunity because they weren’t able to access finance at the right times, so there is still a problem.”
“The reality,” adds Lee Hopley, chief economist at manufacturers’ federation EEF, “is that small and medium enterprises continue to be frustrated by the cost and terms and conditions around lending, with some opting out of using external finance altogether. This cannot be good for growth.”
China’s government has ordered the country’s banks to begin rolling over its loans to local governments, according to the Financial Times. When the global financial crisis broke in 2007-8, the state launched a massive stimulus program. Local authorities in China now have debts worth an estimated $1.7 trillion the FT says.
US president Barack Obama will today call for higher taxes on millionaires and billions of Dollars’ worth of infrastructure projects to create jobs as part of his 2013 budget proposals, news agency Reuters reports.
“I think there is pretty broad agreement that the time for austerity is not today,” White House chief of staff Jack Lew said Sunday.
Obama is expected to repeat his call made during his State of the Union address for the introduction of the so-called Buffett Rule, which would see millionaires pay a tax rate of at least 30%.
The net difference between bullish and bearish gold futures and options contracts held by traders on New York’s Comex – the so-called speculative net long – went up for the fifth week in a row over the week ended last Tuesday, according to the latest data from the Commodity Futures Trading Commission.
The spec net long and open interest both hit their highest levels since the week ended 15 November.
“It is likely that net spec length may consolidate or even decline in the week to 14 February as futures open interest in the period 8-10 February fell in parallel with the gold price,” reckons Carl Firman at precious metals consultancy VM Group.
“Options open interest in this period also shows a rise in puts relative to calls, suggesting some doubt may be creeping into the sustainability of the price rally.”
The volume of gold bullion held to back shares in world’s largest gold ETF the SPDR Gold Trust (GLD) meantime is at its highest level since 20 December, having risen 0.1% over the course of last week.
Ben Traynor
Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.
(c) BullionVault 2011
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.
China’s Rebalancing Should Be Good for Gold Demand
The next stage of China’s development could give gold buyers a boost…
THERE IS an old saying: “Nobody rings a bell at the top or bottom of a market.”
Having said that, anyone reading about the stampede for gold during last month’s Chinese New Year celebrations might have heard a faint ringing in their ears.
Here are a few quotations from various press sources:
- “Some customers just walk in and buy a bunch of 100g gold bars all at once…Companies come in too to buy gold bars for presents.” – branch manager, Industrial and Commercial Bank of China.
- “Some companies are giving out gold instead of cash to their employees” –Jia Zhihong, jeweler, Wuhan.
- “With customers crowding and rushing in, we did not even have time to eat and drink.” – gold counter sales clerk.
- “People seem crazy about gold, snatching it up more like a cheap cabbage than such a precious metal…You have to quickly decide whether to make a purchase, or it will be taken away by others.” – Beijing shopper
- “Think of it like investing in the stock market…Gold maintains its value much better than stocks.” – sales clerk, China Gold store.
The classic signs of an investment mania are there. Mass participation, frenzied buying, an established narrative that something is a ‘sure thing’. But though this may look like the-mania-before-the-crash, that doesn’t mean it is.
China’s industrial development is still very much a work in progress. The likely next phase is a rebalancing of wealth away from industry and towards households. Given the demonstrable appetite for gold among Chinese consumers, this should be a major supporting factor for global gold demand.
According to World Gold Council data, Chinese gold consumption totaled 207.4 tonnes in 2003. By 2009 it had more than doubled to 457.7 tonnes. More recently, gold imports from Hong Kong, widely regarded as a proxy for total gold imports, tripled in 2011.
China only began deregulating its gold market a decade ago. Until the Shanghai Gold Exchange opened in late 2002, the government held a monopoly on gold ownership. It is possible that the growth in Chinese gold demand could merely represent catch-up, but this seems unlikely given how rapidly China’s economy grew over the same period. Ordinary Chinese have been growing steadily wealthier, meaning more and more people have had the wherewithal to buy gold.
A working paper by economists Guonan Ma and Wang Yi published last year by the Bank for International Settlements, for example, found that household savings as a percentage of gross domestic product (GDP) rose from 16% in 2001 to 23% by 2008 – a period in which GDP itself regularly grew by 10% or more a year.
The authors also found there was a considerable rise in household’s average propensity to save – that is, the proportion of disposable income that is held as savings. One possible explanation for this could be that economic growth has raised more and more Chinese to just above subsistence level, as agrarian workers urbanize and take higher-paying factory jobs for instance. As incomes grow, an increasing number can for the first time afford to save. Compared to those on higher incomes, though, these new savers must save a greater proportion of their disposable pay in order to attain a given level of savings.
This is not the only factor likely to have driven Chinese savings higher. Ma and Wang also argue that “precautionary savings motives” also explain the rise in personal savings. They cite the period 1995-2005, which saw a 50% fall in employment at state companies:
‘Downsized employees received modest social welfare benefits, while many smaller money-losing state companies were shut down altogether. As a result, the enterprise-based cradle-to-grave social safety net shrank rapidly…The large-scale corporate restructuring and downsizing between 1995 and 2005 increased both income and expenditure uncertainties and weakened the enterprise-based social safety net, thus reinforcing the precautionary motives to save.’
Consider that for a second. Consider how it would have felt from the perspective of a “downsized” Chinese worker. Your socialist government, in power since 1949, has thrown a whole load of people out of work and done very little to help them afterwards.
In this context, it is understandable why people in China started saving more. One only has to think of the long shadow cast by Germany’s hyperinflation in the early 1920s, and the pathological fear Germans to this day have of price instability, to see how economic upheaval can have an enduring impact on financial behavior.
China therefore looks set to have a high savings rate for the foreseeable future. Furthermore, the rapid growth of Chinese gold demand suggests that many of those who can afford it choose to use some of their savings to buy gold (indeed, many have chosen to store some savings as gold).
Of course, this is not to say that the Chinese will continue to buy gold in ever greater quantities indefinitely. Indeed, it is impossible to know how a sharp slowdown in growth would affect Chinese gold demand. There may be some safe haven buying, especially if financial institutions collapse or people fear higher inflation as a result of any central bank response. On the other hand though, slower growth would sap the buying power of would-be gold consumers.
This is not an academic consideration. China faces a number of likely headwinds going forward. Most immediately, its export-led growth model means it is exposed to any deterioration in the global economy, for example the ongoing crisis in Europe, with which China has major trade links. It’s also probable that China has more deep-rooted troubles brewing. Beijing-based economist Michael Pettis argues that China has for years been misallocating capital “on a grand scale”, with state-owned enterprises investing in projects of questionable economic merit.
Elsewhere Pettis draws a parallel with Japan, which he argues underwent a similar phase of overinvestment, making Japan’s subsequent stagnation akin to what China might face (and also qualitatively different from the post-consumption boom crisis the US and Europe currently find themselves in):
‘This is not the problem that that the US or Europe is suffering from. [The US and Europe] suffer from a typical debt-fueled overconsumption boom, whereas Japan suffered from a typical debt-fueled over-investment boom, and Japan’s period of over-investment was much, much more extreme (centralized investment booms can last much longer and go much further than decentralized consumption booms). This is why I think the Japanese experience tells us almost nothing about what Europe and the US will go through.
‘On the other hand, it might tell us a lot about what China will go through. In fact we can make a more general point. Command economies (Japan, the USSR, Brazil and many others during their “miracle” periods) tend to have much more rapid investment-driven growth during the good times and much more difficult and longer-lasting adjustments.’
So far, so very bearish for China. But Japan’s experience in the years following World War 2 also offers longer term hope. In a working paper published last year, Bank of Japan economists Tomoyuki Fukumoto and Ichiro Muto argue that the high economic growth rates of today’s China mirror those seen in Japan between 1955 and 1970, which they say were “initiated by vigorous investment”.
After 1970, Japan saw a significant rebalancing of its economy away from investment towards consumption:
Consumption and investment in Japan as percentage of nominal GDP
Fukumoto and Muto find that one key factor behind this rebalancing was the rising share of national income that went to labor, with labor’s share of GDP shooting up ten percentage points between 1970 and 1975.
Pettis argues that ongoing rebalancing towards consumption also explains why Japanese living standards have continued to rise over the last two decades despite the stagnant Japanese economy:
‘It was the state sector that bore most of the brunt of the slower growth, and this shows up as the explosion in government debt. Households were fine because although the GDP pie was growing at a much slower rate after 1990 than before, their share of the pie was growing after 1990, whereas it shrank before 1990…I think the same might happen, or at least could happen, in China.’
China’s rebalancing has barely begun; consumption as a share of GDP has continued to fall in recent years much as it has for the last three decades:
Consumption and investment in China as percentage of nominal GDP
At the start of last year, the Economist Intelligence Unit rated the results of China’s 11th Five-Year Plan, which ran from 2006 to 2010. One of the categories was ‘Economic rebalancing’, a term which includes China’s external as well as internal imbalances. China scored poorly in this category, being graded a ‘D’ for its efforts to address ‘external imbalances’, another ‘D’ for ‘excessive investment’ (see chart above) and a ‘C’ for ‘innovation- and services-based growth’.
There are, however, signs that an internal rebalancing may be starting to get underway. The EIU scored China a B- on ‘boosting farm incomes’, a B+ on ‘social security expansion’ and an ‘A’ on ‘reducing regional disparities’, commenting that “economic growth has gradually shifted inland”.
This may go some way towards explaining the rise in household savings as a percentage of GDP noted earlier, and in particular the rise in the average propensity to save as prosperity spreads and raises more people above subsistence. (As an aside, it is worth pointing out that expansion of social security provision could in time actually lead to a fall in savings rates if it sufficiently weakens the precautionary motive for saving – i.e. to provide for contingencies such as sickness and unemployment in the absence of a social safety net).
There are other signs of nascent change. Recent disputes at Apple and Microsoft supplier Foxconn are the latest in a series of industrial incidents to hit China recently. Fukumoto and Muto find that China has seen a sharp rise in the number of industrial disputes since the global financial crisis began:
Number of labor disputes in China
Industrial action can and does yield results. As CNN reports, Foxconn twice gave its Shenzhen workers pay rises in 2010 following a spate of suicides at the plant.
That this rise in industrial action has occurred in the wake of the financial crisis is unlikely to be mere coincidence. But the example of Japan – which saw a rise in industrial disputes from the mid-1960s, and a sharp spike following the oil price shock of the early 1970s – suggests that concessions, once given, are difficult to reverse, as Fukumoto and Muto note:
‘…after the mid-1960s, workers’ sense of entitlement to their “fair share” rose…and their bargaining power strengthened. Consequently, it became difficult to restrain the rise in real wages again after the end of the oil crisis, and the rise in the labor share [of national income] became permanent.’
Indeed, China’s government announced this week that the minimum wage should grow by an average of 13% a year between now and 2015. It remains to be seen how this plays out in practice, but it suggests the authorities are aware of a need to raise household incomes.
China is yet to undergo significant internal rebalancing of real incomes away from industry and towards people, such as that experienced by Japan in the postwar era. There is good reason to assume that, sooner or later, such a rebalancing will occur.
And it is people, not industry, who buy gold. So unless China’s development gets completely stuck, its gold consumption should continue to rise over the long run.
Ben Traynor
Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.
(c) BullionVault 2011
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.
“Desperate Shot in the Dark” of Quantitative Easing “Will Boost Inflation & Gold” Say Analysts
London Gold Market Report
The WHOLESALE MARKET gold price slipped 0.6% to $1730 in London on Thursday morning, regaining most of that dip as the European Central Bank kept its key lending rate on hold and the Bank of England extended its purchases of UK government bonds to £325 billion ($515bn).
When completed, this new Quantitative Easing will see the Bank hold nearly one-third of the UK’s outstanding national debt.
“The growing consensus among central bankers is that their experiment with QE is still working,” wrote Gavyn Davies, now of Fulcrum Asset Management and previously a policy advisor to the UK government, as well as head of global economics at Goldman Sachs until 2001 and chairman of the BBC until 2004, in the Financial Times on Wednesday.
“It was a shot in the dark, and a rather desperate one at that. But up to now it has had the desired effect, which is certainly a far better outcome than the alternative.”
“The Bank of England’s latest round of quantitative easing is likely to increase the risk of higher inflation,” said World Gold Council director Marcus Grubb to Reuters, “and prompt investors to seek assets, such as gold, which can act as a hedge against rising prices.”
The gold price for UK investors today slipped 0.5% to £1093 per ounce as the Pound rallied.
Since the Bank of England began quantitative easing 3 years ago, gold has risen 70% for Sterling investors.
“Continued optimism over Greece is supportive of gold,” said one London dealer this morning, noting the recent link in daily moves between the gold price and the European single currency vs. the Dollar.
“There is agreement on all the issues bar one,” said Greek finance minister Evangelos Venizelos to reporters in Athens today, claiming that only state pensions remain under discussion in budget cuts demanded by Greece’s EU partners and the International Monetary Fund in return for their €130 billion ($172bn) bail-out.
Greek unemployment has risen to 20.9%, the Statistical Authority said today. A large chunk of Greece’s outstanding debt is due for repayment on March 20th.
Holding UK rates today at a record low of 0.5% for the 36th month in succession, the Bank of England announced a shift in its purchases of government debt, targeting more 3-15 year maturities than long-dated gilts.
Twenty and 30-year gilt prices fell on the news, nudging interest rates higher, but shorter-term UK debt rose sharply, knocking the annual yield offered to buyers of 5-year gilts back down towards last month’s record lows beneath 1.0%.
UK inflation over the last 5 years has averaged 3.2% per annum. The Bank’s official target is 2.0% per year.
Back in the gold bullion market, “Everyone is in wait-and-see mode,” Reuters quotes Ronald Leung at Lee Cheong Gold Dealers in Hong Kong.
“We don’t see much scrap [supply] and buying has cooled after prices rebounded. [But] Greece seems to be closer to a concrete deal, which weighs on the Dollar and helps [the gold price].”
Keeping its key lending rate at 1.0% again on Thursday, the ECB will this month repeat its unlimited offer of 3-year loans to Eurozone banks, an offer which drew demand of nearly half-a-trillion Euros in December.
Many analysts expect demand to top €1 trillion on Feb. 29th.
“[Such action] will lead to a lot of interest into gold,” reckons UBS Wealth Management’s head of commodity research, Dominic Schnider.
“Real assets remain something people like to have in their portfolios. $2000 an ounce should be easily achieved. We actually expect prices to go above.”
Adrian Ash
Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.
(c) BullionVault 2012
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.
Gold Set for Biggest Monthly Gain of C21st, But Ends January with “Lackluster” Physical Interest in Asia
London Gold Market Report
U.S. DOLLAR gold bullion prices looked set to record their largest calendar month gain this century by Tuesday lunchtime in London.
Gold prices hit $1745 per ounce – just less than 14% up on the Dollar gold bullion price set at the last London Fix of 2011.
By this measure, January 2012 looked set to record the fourth-largest calendar month gain in the last three decades, and the biggest since September 1999, the month that saw the signing of the Central Bank Gold Agreement, which limited the sales of gold bullion by signatory central banks.
Stocks and commodities also gained Tuesday, while government bond prices dipped.
“In overnight trade in Asia, we continued to see lackluster physical interest,” says Marc Ground, commodities strategist at Standard Bank.
“[There was] even some scrap gold and silver coming to market from Japanese recyclers…nevertheless, prices held steady.”
Physical volumes on the Shanghai Gold Exchange Tuesday were down 28% on the previous day.
The first day’s trading after Lunar New Year saw “strong physical demand” on Monday, according to one gold bullion dealer in Hong Kong.
Silver bullion prices meantime hovered around $33.80 per ounce – 21.2% up on the start of January.
Industrial manufacturers meantime are set to use over 15,000 tonnes of silver in 2012 – 2.5% more than last year – according to estimates by Barclays Capital. Morgan Stanley meantime reckons investors may invest in 2000 tonnes of silver bullion via exchange traded vehicles – following net selling by such investors of 1300 tonnes last year.
“Silver got hammered [following last April's peak],” says Dan Smith, head of metals research at Standard Chartered.
“Now we’re into a phase where it will do quite well…Appeal comes from its widespread use in both industry and investment. I think it’s relatively cheap.”
“The short-term investment argument is not entirely convincing,” counters David Jollie, strategic analyst at Mitsui Precious Metals in London, citing “weak industrial demand” in places like China.
Chinese silver imports in December were 36% down on their average for the last two years, customs data cited by newswire Bloomberg show.
Here in the UK, seasonally adjusted M4, the broadest money supply measure, fell 1.4% in December – its largest one month drop since the Bank of England began recording the data in 1982. The year-on-year fall was 2.5%.
Net consumer credit in November meantime fell by £377 million – the first net drop since last January and the biggest monthly fall since the data series began in 1993.
“There is clearly a risk that credit constraints may hinder the reallocation of resources required to rebalance the economy,” Bank of England governor Mervyn King said in a speech last week, adding that “there is scope for interest rates to remain low, and, if necessary, for further asset purchases [to facilitate quantitative easing].”
Eurozone unemployment meantime hit a record high last month at 16.5 million people – with the unemployment rate at 10.4% – according to official figures published Tuesday by Eurostat.
“In many cases you find firms continuing to delay investment projects,” notes Citigroup economist Guillaume Menuet.
“For those that are still making profits, hiring is being frozen, and for those which are under pressure to hit results or losing money, job losses are becoming the only solution that they have.”
Elsewhere in Europe, banks are preparing to borrow at least €1 trillion when the European Central Bank holds its 3-Year longer term refinancing operation next month – more than twice the amount borrowed at December’s 3-Year LTRO.
Greece meantime is hoping to conclude a deal with its private sector creditors by the end of the week, Greek prime minister Lucas Papademos said Tuesday. There remained however no agreement among European leaders over what to do about the deterioration is Greece’s fiscal position.
“Greece’s debt sustainability is especially bad,” German chancellor Angela Merkel said Monday.
“You have to find a way through more action by the Greek government, more contributions by private creditors, for example, in order to close this gap.”
At yesterday’s summit leaders agreed to accelerate the implementation of the €500 billion European Stability Mechanism, the Eurozone’s permanent bailout fund.
There was also endorsement of proposed new deficit rules – although a German suggestion that the EU appoint a budget commissioner to oversee Greece’s finance appears not to be receiving wider support.
“Surveillance of Greece’s progress is normal,” French president Nicolas Sarkozy said, “but there was never any question of putting Greece under guardianship.”
Over in the US, the Commodity Futures Trading Commission, which regulates gold futures and options trading on the New York Comex, has said it is considering new rules aimed at firms using automated and high-frequency trading systems as part of its efforts to implement the Dodd-Frank legislation on financial services.
Venezuela has completed the repatriation of 160 tonnes of gold bullion – around three quarters of its total reserves that were held in US, European and Canadian banks – newswire Dow Jones reports.
“Venezuela’s gold is now in the hands of Venezuelans, secured by Venezuelans and at the service of all Venezuelans,” said Venezuela’s central bank head Nelson Merentes.
Gold bullion makes up 71% of Venezuela’s total foreign reserves, according to figures from the World Gold Council.
Ben Traynor
Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.
(c) BullionVault 2011
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.
Gold “Still Respecting” Post-Lehman Trend, Fed Policy “Set to Support Gold”, ECB “Should Participate in Greek Debt Efforts”
London Gold Market Report
SPOT MARKET gold bullion prices dropped to $1653 an ounce Wednesday morning London time – down 1.7% from Monday’s high – while stock markets, commodities and the Euro all slid and US Treasuries gained after the head of the International Monetary Fund suggested the European Central Bank could take losses on its Greek bond holdings.
Silver bullion fell to $31.67 – down 1.8% for the week so far.
“On the weekly chart, gold is still respecting the uptrend off the October 2008 low, with key support at $1550,” says the latest report from technical analysts at gold bullion bank Scotia Mocatta.
“If the level of Greek debt held by the private sector is not sufficiently renegotiated,” IMF managing director Christine Lagarde said this morning,” then public sector holders of Greek debt should also participate in the efforts.”
The ECB – which started buying Greek bonds in May 2010 when the crisis first escalated – remains opposed to seeing its holdings of Greek debt restructured, according to newswire Bloomberg, which cited anonymous sources.
“Once again, policy makers leave the room and hope the ECB will fill in,” says Thomas Costerg, London-based European economist at Standard Chartered.
“The risk is that by putting the ECB on board, as the IMF asks, this could result in debt swap negotiations restarting from scratch, which could mean additional delay to an already over-stretched timetable.”
Debt restructuring formed part of an agreement reached last October to give Greece a second bailout worth €130 billion – without which it will be unable to pay maturing bonds worth €14.5 billion on March 20.
Over the course of Wednesday morning the Euro handed back all of this week’s gains against the Dollar.
In thin trade reflecting the absence of Far Eastern players during the Lunar New Year Week, Dollar gold bullion prices were down 0.8% for the week by Wednesday lunchtime.
“In the absence of sustained physical interest, gold is prone to a little more downside this week as bullion continues trading with global risk sentiment,” says VTB Capital analyst Andrey Kryuchenkov, adding that the US Federal Reserve looks “set to remain accommodative for now which is, as ever, gold-beneficial in the long run.”
“The Fed’s stance should continue to support gold,” agrees Marc Ground, commodities strategist at Standard Bank.
“Fundamentally, we believe that the long-term causal drivers of gold are global liquidity (defined as the Fed’s Balance Sheet plus FX reserve holdings) and real interest rates.”
The Fed will announce its latest interest rate decision later today, and is widely expected to leave its target federal funds rate within the range 0% to 0.25%. In addition, it will publish for the first time Federal Open Market Committee members’ projections for the appropriate target rate over the next few years.
“We expect the rate guidance in the policy statement to move the timetable for current accommodation well beyond mid-2013 and into 2014,” says a report from Citigroup fixed-income strategists Peter Goves and Nishay Patel.
US president Barack Obama yesterday outlined his “Buffett rule” for tax reform, which takes its name from the billionaire Berkshire Hathaway chief executive Warren Buffett.
“If you make more than $1 million a year,” Obama said, “you should not pay less than 30% in taxes.”
Obama’s address came days after Republican presidential candidate Mitt Romney disclosed that he paid 13.9% income taxes on $21.6 million of earnings in 2010. Romney disclosed his tax returns following criticism from his rival for the Republican nomination Newt Gingrich.
The UK economy meantime declined by 0.2% in the fourth quarter of 2011, official data published Wednesday show. Were the economy to shrink for a second consecutive quarter, Britain would be back in technical recession.
“[A negative growth rate]gives additional ammunition to those at the Bank of England who want to do more quantitative easing sooner rather than later,” reckons Peter Dixon, London-based global equities economist at Commerzbank, adding that the news “gives some more credence to the idea they will move in February.”
The Bank’s Monetary Policy Committee will make its next policy announcement on February 9.
“With inflation falling back and wage growth subdued, there is scope for interest rates to remain low, and, if necessary, for further asset purchases,” said Bank of England governor Mervyn King Tuesday, referring to the possibility of further quantitative easing.
The news that Britain’s economy had shrunk came a day after it was revealed that net public debt has breached £1 trillion for the first time in history.
The Bank of England’s latest survey of business conditions meantime shows spending, hiring, exports growth, borrowing and investment all weakening at the start of 2012.
Inflation in the cost of labor and raw materials eased slightly. But annual inflation in the price of imports “remained elevated” says the Bank’s summary for January.
While the Pound has stayed relatively steady against the Dollar and Euro over the last 12 months, the Sterling price of gold bullion is up more than 25% compared to this time last year.
Importers of gold bullion in India meantime are delaying buying gold following last week’s decision by the government to switch to a 2% ad valorem import tax – as opposed to the previous flat rate by weight – the Wall Street Journal reports.
Since the new tax is calculated by value, importers who delay will benefit if the price of gold subsequently falls.
High profile investor Dennis Gartman has said that while the gold bull market “is probably still extant”, he is now “neutral” on the prospects for gold bullion.
Ben Traynor
Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.
(c) BullionVault 2011
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.
Gold Touches Six-Week High as Technicals “Turning More Bullish”, Banking Sector Negotiators “Hopeful” for Agreement on Greek Debt
London Gold Market Report
from Ben Traynor
Monday 23 January 2012, 08:30 EST
Gold Touches Six-Week High as Technicals “Turning More Bullish”, Banking Sector Negotiators “Hopeful” for Agreement on Greek Debt
THE U.S. DOLLAR cost to buy gold hit a six-week high of $1677 an ounce Monday morning in London, as stock markets, commodities and the Euro all pushed higher and US Treasury bond prices dipped.
“Near term technical have turned more bullish [for gold],” says the latest technical analysis from Scotia Mocatta, though it sees “psychological resistance looming at $1700.”
The price of buying gold in Euros however fell to €41375 (€1287 per ounce) – down slightly on Friday’s close – as European finance ministers met to discuss Greek debt and a proposal to relax banking rules.
The difference between long contracts to buy gold and short contracts held by noncommercial gold futures and options traders on New York’s Comex exchange – the so-called speculative net long – rose for the second week running in the week ended last Tuesday, according to the latest data from the Commodity Futures Trading Commission.
There was no change last week however in the volume of gold held to back shares in the SPDR Gold Trust (ticker: GLD), the world’s largest gold ETF.
Silver meantime hit $32.82 per ounce Monday morning – 1.8% above Friday’s close.
“Growing investor confidence is evident in [silver] ETF positioning,” reports Standard Bank commodities strategist Marc Ground this morning, citing ETF purchases of 341.8 tonnes in the past week.
One London broker reported Friday that the Sprott Physical Silver Trust (ticker: PSLV) bought around 311 tonnes of silver last week.
Shares in New York-listed PSLV meantime gapped lower at the start of Wednesday morning’s trade, opening 9.4% down on the previous day’s close – a result of “the instantaneous premium evaporation in PSLV,” says Gene Arensberg of GotGoldReport, which had previously warned its readers that the shares’ premium to PSLV’s net asset value could disappear “at the drop of a hat.”
“Ouch for the faithful PSLV buyers,” says Arensberg, “and shame upon the managers of PSLV for allowing the premium to get so out of whack to the upside.”
Eurozone finance ministers meantime met in Brussels on Monday, where they were expected to discuss the terms of Greek debt restructuring, with negotiations in Athens over recent days having failed to produce a deal.
“I remain quite hopeful [of reaching agreement],” Charles Dallara, managing director of the Institute of International Finance – which is negotiating on behalf of banks that hold Greek debt – said Sunday.
The IIF made an offer on Friday to accept voluntary private sector involvement that would amount to losses on Greek bonds of around 65-70%, according to press reports. Dallara described it as “the maximum offer consistent with a voluntary PSI deal”.
A sticking point is the size of the coupon on new bonds that will be swapped for existing ones. Both sides were thought to be close to agreeing an annual rate of between 4% and 4.5%, newswire Bloomberg reported.
Germany and the International Monetary Fund, however, want to see this cut to 3%, according to the New York Times, citing officials involved in the talks.
“I believe that the private sector can accept a lower coupon than the 4% average, but the question then is: will the PSI still be on a voluntary basis?” one senior Greek banker told newswire Reuters.
Any deal that is not voluntary risks triggering payments on credit default swaps – which payout in the event of default. Failure to agree debt restructuring meanwhile also risks jeopardizing Greece’s second bailout – without which it will be unable to pay €14.5 billion of maturing bonds on March 20.
Also at today’s Brussels meeting, German finance minister Wolfgang Schaeuble, along with his French opposite number Francois Baroin, will call for relaxation of banking rules, according to the Financial Times.
The pair will ask for elements of Basel III – the regulations on how much capital banks must hold, due to come into force in 2015 – to be loosened for banks that own insurance companies, such as French banks Societe Generale and Credit Agricole. They also propose a three-year delay for the deadline on disclosing leverage ratios – in contrast to UK regulators, who have called for disclosure ahead of schedule.
Baroin meantime has confirmed that France’s proposed financial transaction tax – one of the issues that led to British prime minister David Cameron walking out of European Union talks in December – will not apply to government bonds.
The US Federal Reserve meantime could make the historic move of announcing a specific inflation target when it gives its interest rate decision on Wednesday, Reuters reports.
Also in the US, Newt Gingrich – who last week said the United States should consider returning to the gold standard – won South Carolina’s Republican presidential primary on Saturday. One of his opponents, Mitt Romney, has subsequently bowed to calls to release his tax returns.
China has seen a “New Year’s rush” to buy gold to mark the Year of the Dragon, which begins today, the FT reports.
“Some customers just walk in and buy a bunch of 100g gold bars all at once,” it quotes one manager at Chines bank ICBC.
“People like to give them away…companies come in too to buy gold bars for presents.”
ICBC – the world’s largest bank by stock market cap – announced last week that 2.33 million Chinese citizens use its gold accumulation program, which currently holds 22 tonnes of gold.
Ben Traynor
Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.
(c) BullionVault 2011
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.
Real Risks to the Gold Price
Pending the big downturn in gold, here’s 3 near-term risks to beware…
IF YOU’VE BEEN paying attention, then you’ll remember how gold can make financial crises fun. Gold bulls were so short of things to keep them awake at night, in fact, many will no doubt be grateful for the 20% plunge of late 2011. Y’know, just to keep their hand in.
“We think the peak would be towards the end of this year or maybe some time in the first half of next year,” says Neil Meader, research director for Thomson-Reuters’ 2011 acquisition, the GFMS precious metals consultancy.
The trigger for gold’s final top and decline? “Anything that really signals to the market that the structural imbalances and the various problems affecting the strength of various currencies are moving behind us, that we are moving beyond this current financial crisis situation,” says , speaking to TheStreet after launching GFMS’s latest Gold Survey Update in New York on Tuesday.
Now, whatever you make of that risk, gold investors should perhaps be pleased to see the world’s leading data and analysis provider flagging such an event. Like pullbacks in a bull market, it can only be healthy to consider the inevitable end.
In particular, says Neil Meader, “One overt trigger that is worth looking for is the start of a serious ratcheting up of interest rates. Because, for gold investment to be popular, you do need really low interest rates.”
Of course, the risk of higher interest rates look about as high right now as interest rates themselves – i.e., zero. Even where the cost of borrowing or the return on cash is better than nothing, it isn’t after you account for inflation. And as BullionVault never tires of reminding people, it’s that rate – the real rate of interest – which really matters to the ebb and flow of gold demand in the end.
| Ave. annual yield on 10-year T-bonds after inflation (%) | Real change in Dollar gold price (after inflation) | |
| 1970-1980 | 0.41 | plus 806% |
| 1980-1990 | 5.03 | minus 61% |
| 1990-2000 | 3.57 | minus 47% |
| 2000-date | 1.66 | plus 303% |
Hence the rise in global gold prices, rather than just in Dollars, over the last decade. It shows clearly in our Global Gold Index, mapped above. The GGI prices gold against a weighted basket of the world’s top 10 currencies, as measured by the size of their issuing economy. It’s risen 5-fold over the last decade, just like the S&P index of the 500 largest US corporations did in the 1990s. Unlike the S&P, however, gold hadn’t already risen 5-fold in the 15 years previous.
Still, this run cannot continue indefinitely. And pending the big downturn in gold prices apparently nailed on for end-2012 – or early 2013, or maybe a bit after, if not whenever this financial crisis is finished and things get back to what we used to call normal – here’s 3 things likely to make gold owners reach for the Valium at some point or other:
#1. Europe
Oh sure; gold offers unique insurance against default or devaluation, because it can’t be created or destroyed, and it is no one else’s liability to renege on (so long as you own it outright). Short term, however, a credit squeeze is likely to force up the Dollar and drain liquidity from derivative markets, including gold futures. Repeating the impact of Lehman’s 2008 collapse, Europe’s credit crunch in the second-half of 2011 forced the collapse of broker MF Global, further helping the speculative position in US gold futures fall in half. That’s certain to dent prices short term, even if gold investment demand for physical bar and coin is surging for fear of the political and monetary reaction.
#2. China
The middle kingdom is supposed to be an unalloyed good for gold prices. Disappointing both GFMS and ourselves by failing to take out India’s top spot in 2009, it’s likely to stand closer still as world #2 in 2012. But unlike investors here in the developed West, Chinese gold demand clearly shows a significant and positive link with economic growth – and no one yet knows how a credit squeeze or “hard landing” might affect the globe’s fastest-growing demand for physical bullion. Our guess is that tight credit and stalling income growth wouldn’t be good for gold. Beijing’s response might be, however, if 2008-2009 is a guide.
#3. Volatility
Guaranteed in 2011, volatility in gold prices still lagged US equities, but that’s small comfort if you imagined owning gold really would let you sleep through the night. Owning physical property, in law, means you escape credit, not price risk. Scarier still for retained wealth trying to hide from the storm in gold, volatility is known to dent India’s household buying, the world’s largest single source of demand. Imports fell 8% by weight in 2011, thanks to a near-collapse in the final 3 months. There’s also a plain risk that – after rising each year since 2001 – the recent whip-sawing of the gold price might dissuade Western investors, too. After all, if gold is supposed to be a “safe haven” amid any event, it failed in the second-half of 2011, even though it’s tripled during this 5-year crisis so far.
There, all that noise should help keep you awake tonight. As for tomorrow, there are plenty of other nightmares threatening your wealth elsewhere. Surging real interest rates paid to your cash savings shouldn’t be one of them.
Adrian Ash
Adrian Ash is head of research at BullionVault – the secure, low-cost gold and silver market for private investors online, where you can buy physical gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.
(c) BullionVault 2012
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.
“Key Pillars” of Gold Bull Market “Intact” as Euro Banks “Rely on ECB”, Chinese Gold Saving Accounts Top 2.3 Million
London Gold Market Report
WHOLESALE PRICES to buy gold and silver with Dollars both eased back after touching new 5-week highs in London, rising 1.3% and 3.0% respectively for the week-so-far as the US currency fell further from this week’s 17-month high to the Euro.
Global equities rose for the fourth day running, with shares in Bank of America adding 6.1% in pre-market US trade after it reported better-than-forecast quarterly earnings.
Rising to a two-week high above $1.29, the Euro pushed the price to buy gold for citizens of the 17-nation currency union below last week’s finish at €41,500 per kilo.
Talks in Athens between government and investor representatives seeking to agree a 50% writedown of Greek bonds – and the interest rate on replacement debt – entered their second day.
Both the Spanish and French governments meantime raised new loans from bond investors at slightly lower interest rates than at the last time of asking, despite last weekend’s downgrade to their credit ratings.
“Momentum [in prices to buy gold] did slow in overnight Asia trade,” says a note from one London dealer, pointing to Wednesday’s late rally.
“Precious metals lacked direction again,” says another, noting how “the conflict between risk-on and risk-off trading” in financial markets is “clearly influencing the indecisive price action” in gold, silver bullion and the other precious metals.
In the commodities market today, European Brent crude oil rose to $111 per barrel after Iran’s ambassador to Washington told US television that closing the Strait of Hormuz shipping route is “an option” if Tehran suffers further international sanctions over its nuclear program.
Copper prices meantime rose to a four-month high in London, as reports from China – the world’s No.1 consumer of the metal – claimed that Beijing will delay tighter bank regulations in a bid to boost economic growth from the two-year low of 8.9% seen at the end of 2011.
“Investors should look at China,” says John Smolinski, manager of the US$2.8 billion TD Canadian Equity Fund, now rebuilding his positions in base-metal and other commodity producer equities.
“Yes, the economy is slowing, housing prices are going down, the level of construction is slowing. But that’s probably a good thing. At some point the government officials should get comfortable enough and start easing [credit supply], and that should be good for commodities.”
Figures from ICBC – the world’s largest bank by stock-market cap – said Thursday that 2.33 million Chinese citizens now buy gold through its gold accumulation savings account.
Launched in April 2010, the program currently holding 22 tonnes of bullion. Comparable schemes in Japan reached 0.7 million accounts at their peak, according to Bruce Ikemizu, manager of Standard Bank Tokyo.
“The Chinese really love gold,” said ICBC’s deputy head of precious metals Shi Xudong to reporters today.
“The fact that the government has started to clean up the gold market is favorable to our business,” he added – pointing to this month’s ban on all but two officially recognized Shanghai exchanges for trading gold futures contracts.
Looking more globally, “Gold’s key pillars of support remain intact,” reckons a research note today from Barclays Capital here in London, “ranging from central bank buying to negative interest rates and rising longer-term inflationary pressures supporting investment demand.”
Interest rates on UK government bonds fell Wednesday to fresh all-time lows as debt prices rose, knocking the 10-year gilt yield down to 1.92%.
Consumer price inflation in the UK last month dipped to 4.2% per year, according to official statistics. Bank deposit interest rates have now been negative – after inflation – since May 2008, costing savers 2.5% of their money in real purchasing power during 2011.
Total UK debt – including government, corporate, consumer and banking – rose to 507% of annual economic ouput in 2011 according to new research released Thursday by McKinsey analysts, up from 310% a decade ago and higher than any other major economy including Japan.
Over in the Eurozone, “The EFSF [stability fund] losing S&P’s top credit rating proves in my opinion that there are limits to solving the crisis,” said German Bundesbank president – and ECB voting member – Jens Weidmann in a speech last night.
The ECB has now bought €217 billion ($279bn) of government bonds issued by Euro member governments since May 2010.
“It is clear that Italian and Spanish mid cap [banks] have no other option than to rely upon the [European Central Bank] for their funding needs,” says a note from Morgan Stanley analysts, listing 38 banks who participated in last month’s €489 billion loan of 3-year money, quoted by the Financial Times’ Alphaville blog.
The ECB will repeat its unlimited offer again at the end of February.
Adrian Ash
Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.
(c) BullionVault 2012
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.
“Bullish Macro Factors” to Drive Gold in 2012 Rather than Dollar, “Ringleader of Intolerance” Germany sees Negative Growth in Q4
London Gold Market Report
from Ben Traynor
Wednesday 11 January 2012, 08:40 EST
“Bullish Macro Factors” to Drive Gold in 2012 Rather than Dollar, “Ringleader of Intolerance” Germany sees Negative Growth in Q4
SPOT MARKET gold prices rose to a one-month high of just under 1647 per ounce Wednesday morning – a 5.1% gain for January – before easing back as the Dollar rallied on the currency markets.
The gold price in Euros meantime touched levels not seen since December 8, hitting €41,502 per kilogram (€1290 per ounce), while the Euro currency fell to 15-month lows against the Dollar following disappointing German growth data.
The previous day saw spot market Dollar gold prices break through their 200 day moving average, which yesterday sat at $1626.86 per ounce by PM London Fix prices.
“The move higher today was not expected as it was against a bearish picture,” writes Russell Browne, technical analyst at bullion bank Scotia Mocatta, adding that “it will take a number of days of closes above the 200 day moving average to give the bulls confidence to re-enter the market.”
“While the Dollar may not see a significant correction soon,” says a note from Societe Generale, “and is likely to continue to gain against the Euro as the Eurozone crisis persists, the negative effects of a stronger Dollar on gold are likely to be largely diminished in 2012, allowing the bullish macro drivers to dictate price action once again.”
Silver prices meantime rose to $30.31 per ounce – level with the week’s high and 8.6% up for the month so far – before they too eased back, while stocks and commodities ticked lower and major government bond prices gained.
Germany’s economy shrank by 0.25% in the fourth quarter of 2010, newswire Reuters reports, citing an official from the Federal Statistics Office. For 2011 as a whole, gross domestic product grew at 3.0%, down from 3.7% a year earlier, official data show.
Growth in the Eurozone meantime was half that initially reported in Q3, European Union statistics agency Eurostat now says, after revising Q3 2011 growth from 0.2% to 0.1%.
“Germany cannot isolate itself so easily from tensions within the Eurozone,” says Joerg Zeuner, chief economist at VP Bank in Liechtenstein.
“In addition the export sector is facing a difficult period given the fall in global demand.”
“The best resolution [to the Eurozone crisis]…is that Germany take steps to reverse its trade surplus,” argues Beijing-based economist Michael Pettis.
“[However,] countries that run large and persistent trade surpluses never seem to understand that their surpluses are mainly the consequences of domestic policies that generate additional domestic growth by absorbing foreign demand.”
Italian prime minister Mario Monti has called for more support from the European Union ahead of a meeting in Berlin today with German chancellor Angela Merkel.
“I am demanding heavy sacrifices from Italians,” he tells German newspaper Die Welt.
“[Unless] concrete advantages become visible…a protest against Europe will develop in Italy, including against Germany, which is seen as the ringleader of EU intolerance, and against the European Central Bank.”
Almost the entire €489 billion the ECB lent to Eurozone banks at last month’s 3-Year longer term refinancing operation has been redeposited with the central bank reports news agency Bloomberg, citing estimates from Barclays Capital made using ECB data.
“It’s illusory to think that the [3-Year LTRO] will translate into credit generation,” says Philippe Waechter, chief economist at Natixis Asset Management in Paris.
“It will assuage some of the anxiety banks have regarding their liquidity needs. But they’ve engaged into a massive overhaul of their strategy and shrinkage of their balance sheets, which is, coupled with the deteriorating economy, not compatible with increasing credit.”
Authorities in Iran meantime have blamed Israel for a car bomb that killed a nuclear scientist in Tehran.
Also in Iran, local press reported yesterday that officials had denied rumors that the authorities were blocking any text messages that contained phrases such as ‘Dollar’ or ‘foreign currency’. The imposition of US sanctions has reportedly led to increased interest in holding gold and Dollars as a hedge against Rial depreciation.
Gold bullion dealers reported strong demand from India on Wednesday, Reuters reports, as the Rupee rallied 1.5% against the Dollar to hit a one month high. The weak Rupee saw record domestic gold prices in India last year, weighing on demand during what is traditionally a strong season for buying gold.
China meantime imported a record volume of gold from Hong Kong in November, according to official data. The Hong Kong government’s Census and Statistics department reports that just under 102.8 tonnes of gold were imported by China, equivalent to 18% of China’s total private sector gold consumption in 2010 by World Gold Council figures. Imports from Hong Kong are generally regarded as a proxy for overall imports.
Ben Traynor
Gold value calculator | Buy gold online at live prices
Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.
(c) BullionVault 2011
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data
Wall Street’s Best Bet for Crisis-Beating Returns
By: Adrian Ash, BullionVault
So how did the top US mutual funds stack up vs. the gold price since 2007…?
PAST PERFORMANCE is no guide to the future. But if you don’t study history, just what will you track instead?
December 2011 marked the fifth anniversary of the end of Ownit Mortgage Solutions – a small lender in the big scheme, but “maybe the canary in the coalmine,” according to one mortgage-backed security manager back at the end of 2006.
Let’s hope he found a new career in short order. Because come March 2007, tittle-tattle claimed that distress was spreading from the subprime collapse to US and Eurozone hedge funds. In July, news leaked and then broke of the collapse of two hedge funds at Bear Stearns, and the permanent emergency had begun.
What fun lay ahead! With the gold price at just $650 per ounce too! Silver was knocking around $13 the ounce. Together, that’s made for quite the track record since…
The Top US Fund Managers: Annualized Returns in Per Cent
| Silver1 | Gold | No. of funds beating top precious2 | Top US mutual3 | Top fund’s return | Ave. fund return | ||
| 10 years | 20.08 | 19.00 | 11 | USAGX | 27.01 | 0.63 | |
| 5 years | 16.92 | 20.03 | 1 | OSFDX | 40.68 | 0.63 | |
| 3 years | 37.54 | 21.88 | 7 | OSFDX | 67.57 | 11.64 | |
| 1 years | -8.00 | 11.65 | 195 | GVPIX | 44.31 | -1.99 |
1. US Dollar precious metals prices from the LBMA, periods ending 30/12/2011.
2. Fund count by BullionVault, using Lipper data via WSJ Online.
3. Single-best fund, best return & average return of all mutual funds taken from MorningStar.
USAA Precious Metals & Minerals you probably know. Co-manager Mark Johnson stepped down last month, leaving Dan Denbow to continue running the single-best performing US mutual of the last 10 years. Other big precious-metal miner funds pack the list of 11 mutuals to outperform silver and the gold price.
GVPIX you might expect to know too, what with it delivering 44% returns in calendar-year 2011. ProFunds US Government Plus led a bunch of long Treasury-bond portfolios. The old Lehman’s TLT tracker returned 34% – who needed active management, let alone risk, last year?
But the stand-out fund over both the last 3 and the last 5 years? The only mutual to beat gold for US investors since the eve of this crisis is Oceanstone. Don’t feel hard cheated if you’ve never heard of it. Apparently it’s got less than $15 million in assets, even though the minimum investment is $3,000. Its stellar 5- and 3-year records include a ridiculous 264% made in 2009, just from doing what it does – seeking value in common stocks on the NYSE.
Yes, it can be done. And yes, it could be done too. US investors really could beat gold since the alarm bells rang out at the turn of 2007. Because out of the 7,500 separate funds available – with 22,000 shares classes to choose from – one fund managed it. Just like 7 funds (go on, count ‘em) managed to beat silver since the turn of 2009, and fully 11 separate US mutual funds managed to beat silver since the start of 2002.
Adrian Ash
Adrian Ash is head of research at BullionVault – the secure, low-cost gold and silver market for private investors online, where you can buy physical gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.
(c) BullionVault 2012
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.
