Tag Archives: Gold

The Golden Hedge

Investors who do not hold gold or view it purely as a temporary safe haven asset are failing to harness its full potential to protect wealth, according to a new study published by the World Gold Council (WGC). In the analysis the WGC shows that during the period between October 2007 and March 2009—the height of the global financial meltdown—an investor with a portfolio of US$10 million experienced an additional US$500,000 financial loss simply by not maintaining a position in gold.

“In 18 of the 24 tail risk scenarios analysed by the WGC, portfolios which included gold outperformed those which did not.”

World Gold Council


Perhaps not big news, but yet an important documentation: In its latest report – “Gold: Hedging Against Tail Risk” – the WGC shows that a modest, consistent holding of gold mitigates the potential for significant loss of value during extreme market events.

In the analysis the WGC shows that during the period between October 2007 and March 2009—the height of the global financial meltdown—an investor with a portfolio of US$10 million experienced an additional US$500,000 financial loss simply by not maintaining a position in gold.

The study used a composition similar to a benchmark portfolio,1 which included an 8.5% allocation to gold, to show that total losses incurred during the period reduced by 5% relative to an equivalent portfolio without gold.

In 18 of the 24 tail risk scenarios2 analysed by the WGC, portfolios which included gold outperformed those which did not.

The term tail risk refers to extreme events that may be considered unlikely, such as the “Black Monday” market crash of October 1987, but which tend to have a considerably negative effect on an investor’s capital when they do occur.

“In the last decade we have seen two of the worst bear markets in the last hundred years. As one might expect, sensitivity to risk still runs high for investors around the world, and as assets are rebuilt an ability to protect capital irrespective of market conditions is paramount. Considering portfolio diversification is clearly important, but protecting against systemic risk can be an entirely separate matter. This research shows that gold protects against tail risk events, but equally in more positive times reduces the volatility of a portfolio without sacrificing expected returns,” Investment Research Manager Juan Carlos Artigas at the World Gold Council, and author of
the research report, says in a statement.

The analysis also suggests that even relatively small allocations to gold, ranging from 2.3% to 9.0%, can have a positive impact.

On average, such allocations can reduce the Value at Risk (VaR) while maintaining a similar return profile to equivalent portfolios which do not include gold.

Conceptually, VaR is a way of measuring the maximum amount an investor could expect to lose in a given period of time, with a certain degree of confidence, in the case of an unlikely, yet possible, event occurring.

“We now inhabit a world characterised by greater volatility and higher levels of investment risk. Robust asset allocation strategies are central to a return to financial stability. Gold’s ability to move independently of most assets usually held by institutions and individuals, and to hedge against inflation and currency fluctuations, all mean that it is highly effective as a preserver of long term wealth and should form a foundation of any long term investment portfolio. This report sets out how gold can protect against negative events, which are not easy to predict but can substantially erode wealth,” managing director Marcus Grubb at WGC says.

Here’s a copy of the full report: Gold Investment Digest October 2010.

Press release.

See also: Positive Long-Term Gold Price Trend Underpinned By Appetite For Gold’s Wealth Preservation Properties.

 

1 Comment

Filed under International Econnomic Politics, National Economic Politics

Gold Demand Rose By 36% In Q2, Gold ETF Demand Up 414%

Total gold demand1 in Q2 2010 rose by 36% to 1,050 tonnes, largely reflecting strong gold investment demand compared to the second quarter of 2009. In US$ value terms, demand increased 77% to $40.4 billion, the World Gold Council reports. Demand for paper gold – ETFs – rose by 414%.

“European retail investor demand has increased significantly.”

Marcus Grubb


“Economic uncertainties and the ongoing search for less volatile and more diversified assets such as gold will underpin investment demand for gold in the immediate future. Further, in light of lingering concerns over public debt levels and the euro, European retail investor demand has increased significantly,” Marcus Grubb, managing director at World Gold Council, says in a statement.

Demand for gold will remain robust during 2010 as a result of accelerating demand from India and China, as well as increasing global investment demand driven by continuing uncertainty over public debt and economic recovery, the World Gold Council (WGC) says.

According to the WGC’s Gold Demand Trends report for Q2 2010, published today, demand for gold for the rest of 2010 will be underpinned by the following market forces:

India and China will continue to provide the main thrust of overall growth in demand, particularly for gold jewelery, for the remainder of 2010.

Retail investment will continue to be a substantial source of gold demand in Europe.

Over the longer-term, demand for gold in China is expected to grow considerably. A report recently published by The People’s Bank of China and five other organizations to foster the development of the domestic gold market will add impetus to the growth in gold ownership among Chinese consumers.

Electronics demand is likely to return to higher historic levels after the sector exhibited further signs of recovery, especially in the US and Japan.


Demand For Gold ETFs Up By 414%

Total gold demand1 in Q2 2010 rose by 36% to 1,050 tonnes, largely reflecting strong gold investment demand compared to the second quarter of 2009. In US$ value terms, demand increased 77% to $40.4 billion, according to the WGC report.

Investment demand2 was the strongest performing segment during the second quarter, posting a rise of 118% to 534.4 tonnes compared with 245.4 tonnes in Q2 2009.

The largest contribution to this rise came from the ETF segment of investment demand, which grew by 414% to 291.3 tonnes, the second highest quarter on record, WGC points out.

Physical gold bar demand, which largely covers the non-western markets, rose 29% from Q2 2009 to 96.3 tonnes.

Global jewelery demand remained robust in Q2 2010. In the face of surging price levels, consumption totaled 408.7 tonnes during the second quarter of 2010, just 5% below year-earlier levels. Gold jewelery demand in India, the largest jewellery market, was little changed from year-earlier levels, down just 2% at 123.0 tonnes. In local currency terms, this translates to a 20% increase in the value of demand to Rp216 billion.

China saw demand for gold jewelery increase by 5% to 75.4 tonnes3. While growth in demand in tonnage terms was hindered by extreme weather conditions, the growth in the local currency value measure of demand was 35% to RMB 19.8 billion.

With the return of demand for consumer electronics, industrial demand grew by 14% to 107.2 tonnes, compared to Q2 2009.

Flight To Quality

“While many investors turned to gold as a ‘flight to quality’ in response to the uncertain financial environment, this interest has proved resilient even though a sense of optimism has started to return to some sectors of the investment community. In addition to the ETF market and physical bar and coin market, the demand for gold through internet based investment platforms is likely to provide further sources of investment demand,” Marcus Grubb, managing director at World Gold Council, says.

“Economic uncertainties and the ongoing search for less volatile and more diversified assets such as gold will underpin investment demand for gold in the immediate future. Further, in light of lingering concerns over public debt levels and the euro, European retail investor demand has increased significantly,” he adds,

“Over the past quarter, demand for gold jewelery in key Asian markets has been challenged by rising local prices. Nevertheless, we are seeing a deceleration in the pace of decline in demand, providing a strong outlook for ongoing recovery in this crucial market segment,” Mr. Grubb says.

Price of gold over the last two years. (RSI still tending up).

Here’s a copy of the full Q2 report from World Gold Council.


Related by the Econotwist:

Mike Krieger Discusses Politics, Economics, And Gold On Keiser Report

Want To Be Covered In Gold?

Gold and Silver: Avoid Bandwagon Jumpers at All Costs

The Safest Bet During Uncertain Markets

Civil And Criminal Probes Against JP Morgan For Silver Manipulation

Gold Coin Sales Surge

The Great Golden Lie

*

*

Select Your Language:

Français * Italiano * Deutsch * Português * Español* Русский * العربية * Svenska* 中文 * 日本語

Enhanced by Zemanta

2 Comments

Filed under International Econnomic Politics

Want To Be Covered In Gold?

Well, here’s your chance; a Swiss resort are now offering guests a luxurious massage and skin treatment that involves a bath in waters enriched with oils and 23 carat gold flakes, before 24 carat gold leafs are massaged into your back, stomach, legs and arms.

“This luxury treatment acts not only on the exterior, but also stimulates the mind and spirit.”

The Grand Resort Bad Ragaz

Guests at the Swiss health retreat are being offered the chance to harness the beautifying benefits of gold leaf. The resort’s new “Gold Temptation” massage aims to bring the benefits of the metal into the 21st century, according to the World Gold Council.

The Grand Resort Bad Ragaz said that the precious metal has been used in cosmetic treatments for thousands of years, with Egypt‘s legendary beauty Cleopatra thought to have used it to maintain her complexion.

Indeed, gold has been found to hydrate skin and reduce the appearance of fine lines, it added.

The resort’s new “Gold Temptation” massage aims to bring the benefits of the metal into the 21st century, the World Gold Council writes on their website.

It starts with a 20-minute bath in waters enriched with oils and 23 carat gold flakes.

Guests then have 24 carat gold leaf massaged into their back, stomach, legs and arms to create a “super-hydrating treatment” that leaves skin “feeling silky smooth with a healthy, golden glow”.

Here’s how The Grand Resort Bad Ragaz describes the treatment on their website:

“Enjoy an incomparably luxurious massage with wafer-thin 24-carat gold leaf. Or a gold bath, enriched with 23-carat gold leaf. The gold warms the skin and relaxes it even before the massage. It has a soothing effect and restores radiance to pale skin. The precious oils regenerate and moisturize the skin, and give it a golden glow. Moreover, this luxury treatment acts not only on the exterior, but also stimulates the mind and spirit.”

Price; about 300 euro per person.

The Grand Resort Bad Ragaz, which is located around one hour from Zurich, recently underwent a €100 million (£83 million) refurbishment and comprises two five-stars, a thermal spa and its own health center.

PS:

Be sure to pass this on to the AIG executives – I’ve heard they really appreciate a good spa.

Gold At New Record Price

By the way – the price of gold reached a new all-time-high, Tuesday, climbing to USD 1252,03 before retreating to below 1240.

Enhanced by Zemanta

1 Comment

Filed under International Econnomic Politics