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Spot
Gold Prices broke above $1300 an ounce early in London trade on Monday,
pulling silver to new 30-year highs above $21.60 as world stock markets crept
higher.
US
crude oil contracts held north of $76 per barrel while the US Dollar
recovered from new 5-month lows to the Euro, hit overnight in Asian trade.
Major
economy government bonds rose, pushing interest rates down across the board
and nudging 10-year UK gilt yields back below 3.00%.
"The
conditions for the kind of sharp fall in Gold Prices that followed the 1970s'
bull market are entirely absent today," said investment author and
pension-fund manager Shayne McGuire this morning at the London Bullion Market
Association's annual conference.
After
gaining 1000% in the previous 10 year, he said, gold only fell against a
backdrop of "sky high interest rates, low equity valuations and - most
importantly - low debt-to-GDP ratios in the developed world."
Held
this year in Berlin - and again sold out, as in Edinburgh 2009 - the LBMA
conference brings together 450 bullion-market professionals representing
industry players from miners to refineries, assayers, bullion banks, vault
operators, investors and analysts.
Chief
executive Stewart Murray opened the two-day meeting by reminding last year's
delegates of their average Gold Price forecast for today's event, "a
bullish" but overly cautious $1181 per ounce.
By
Sept. 2011, according to the attendees' average forecast today, the Gold
Price will reach $1406 per ounce - "marginally less bullish than last
year," as Dr.Murray noted.
Two
issues dominate this year's presentations - regulation of London's "over
the counter" physical bullion market, which the Association is working
to "get ahead" by formalizing its forward-market data as chairman
Kevin Crisp noted, plus the gathering pace of institutional Gold Investment.
"The
financial crisis has created a seismic shift in Gold Investment," said
Graham Birch, former manager of the $3 billion Blackrock Gold & General
fund, and now a non-executive director of Petropavlovsk.
"Institutional
investors now worry about return of, rather than return on, their
money," said Birch, as well as expecting lower rates of return,
suffering very poor interest rates on cash, acknowledging counterparty risk
as a major concern, and needing to diversify across asset classes.
"Gold
Price movements will continue to be dominated by investors," Birch went
on, noting that the last year of the Central Gold Bank Agreement - which
expired Sunday, with an agreed ceiling for 400 tonnes of gold sales - saw
Europe's major holders unload only 6.2 tonnes of their Gold Bullion, a drop
of 92% from the previous year.
"Gold
is the ultimate financial insurance," said Teachers Retirement System of
Texas manager Shayne McGuire, "and pension funds are only just beginning
to talk about this."
Current
pension fund allocations to gold stand around 0.3%, McGuire showed in his
speech, with all physical Gold Investment now equal to perhaps 0.5% of the
world's total investable wealth.
That
compares with 3% at the 1980 price peak, a level of 5% in 1968, and perhaps
20% or more prior to 1933.
"Investors
should be positioning for 'tail events'," said former Bank for
International Settlements and current OECD economic advisor William White in
his keynote address to the LBMA conference.
Warning
that government and central-bank policy responses to the financial crisis are
both based on "uncertain" models - and "could lead to further
bubbles" as they have since 1987's October Crash in the stock market -
White said he fears deflation ahead, with a clear possibility of a massive
spike in inflation.
"Is
there room for gold in investment portfolios in this kind of world? The
answer, I think, is undoubtedly yes."
Adrian
Ash
Head of Research
Bullionvault.com
You can also Receive
your first gram of Gold free by opening an account with Bullion Vault : Click
here.
City correspondent
for The Daily Reckoning in London, Adrian Ash is head of research at BullionVault.com –
giving you direct access to investment gold, vaulted in Zurich, on $3 spreads
and 0.8% dealing fees.
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.
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