Today’s AM fix was USD
1,706.75, EUR 1,305.35, and GBP 1,058.65 per ounce.
Yesterday’s AM fix was USD 1,718.00, EUR 1,317.59, and GBP 1,069.67 per
ounce.
Silver is trading at $33.55/oz,
€25.60/oz and £20.77/oz. Platinum is
trading at $1,598.50/oz, palladium at $685.10/oz and rhodium at $1,075/oz.
Cross Currency Table – (Bloomberg)
Gold climbed $2.00 or 0.12% in New York yesterday and closed at $1,715.20/oz.
Silver dropped to $33.38 then rose to as high as $33.821 and then retreated,
but it still finished with a gain of 0.66%.
Gold fell to its lowest
point in a month on Tuesday, briefly touching
$1,700/oz after a drop below $1,710/oz triggered some technical selling.
Investors with a longer time
horizon continue to accumulate on the dip and the uncertainty of shaky
sovereign economies will fuel continuing diversification into gold.
Yesterday, Australia’s
central bank cut interest rates ¼ point to match a record low. Central
banks around the world continue to flood the market with cheap, printed fiat
money which will continue to boost gold bullion.
Platinum group metals have see a rise in the past few weeks in tandem with car sales
data, as the metals are used in exhaust catalysts.
Warren Buffett’s General
Re-New England Asset Management has warned that until central bank monetary
policies around the world change “there will be a tendency to higher
gold prices.”
General Re-New England Asset
Management, a unit of Warren Buffett’s Berkshire Hathaway Inc., said
gold may advance as businesses temper spending and central- bank stimulus
measures fall short.
Gold’s climb last year
to more than $1,900 an ounce was fuelled by the expectation that government
spending cuts in Europe would reduce demand for goods and services, GR-NEAM
Chief Investment Officer John Gilbert wrote in a newsletter posted on the
unit’s website today, as reported by Bloomberg.
“There is growing
evidence that the rising price of gold is a statement about the discouraging
prospects for returns on productive investments,” Gilbert said.
“We hope that this
analysis is wrong. We fear that it is not.”
Gold vs Berkshire, from 1997 –
(Bloomberg)
Buffett, 82, has said
productive assets like farms and companies will outperform gold over the long
term.
Gold retains some of its
appeal to investors even as central banks around the world implement policies
to spur investment, Gilbert said.
“Businesses express
caution by not making the investments necessary to improve
productivity,” Gilbert wrote. It’s not “clear that activist
central banks can repeal gravity by encouraging investors to take risk
anyway. There will be a tendency to higher gold prices until that changes.”
GR-NEAM had $64.4 billion in
unaffiliated assets under management as of Sept. 30. The investment adviser
primarily serves insurers.
The European Central Bank
has provided the region’s banks with cheap three-year loans and committed
to buy the bonds of distressed nations as long as they fix their budgets and
reform their economies. The Federal Reserve has kept borrowing costs near
zero and expanded its balance sheet to help stimulate the U.S. economy, the
world’s largest.
Buffett said in a February
letter to Berkshire shareholders that investors should avoid gold, because
its uses are limited and it doesn’t have the potential of farmland or
companies to produce new wealth. Achieving a long-term gain on the metal
requires an “expanding pool of buyers” who believe
the group will increase further, he said.
“What motivates most
gold purchasers is their belief that the ranks of the fearful will
grow,” he wrote. “During the past decade that belief has proved
correct. Beyond that, the rising price has on its own generated additional
buying enthusiasm, attracting purchasers who see the rise as validating an
investment thesis. As ‘bandwagon’ investors join any party, they
create their own truth -- for a while.”
Buffett and his partner
Charlie Munger’s lack of appreciation of gold
as financial insurance and bias against gold either shows a significant and
potentially costly blind spot. Alternatively, there is an element of
“talking their own book” as Berkshire is obviously very exposed
to the U.S. dollar, U.S. equities and U.S. banks and the pair may realise the threat that gold poses to their lack of
diversification.
The performance of Berkshire
Hathaway versus gold since 1996 and since the outset of the financial crisis
five years ago (see charts) shows gold’s importance as a hedging
instrument and a safe haven in a portfolio.
Buffett deserves the title
‘Sage of Omaha’ and is to be respected but his failure to
appreciate gold’s importance as a diversification in a portfolio and
his repeated negativity towards gold, in contrast to his father Howard
Buffett, will not be judged kindly in financial history.
Gold vs Berkshire, from 2007 –
(Bloomberg)
It is never too late to do
the right thing and to ensure his legacy Buffett should acknowledge gold has
intrinsic value, has utility as money, as monetary asset, a finite currency
and as financial insurance in a portfolio.
By acknowledging the truth
he will regain much respect, help protect many investors and he may even
manage to protect and grow his own and his shareholders wealth.
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