20 December 2013 - Still lots of reasons to hold gold

Posted: 20 Dec 2013 05:01 PM PST

From:http://www.theage.com.au/money/investing/still-lots-of-reasons-to-hold-gold-20131219-2zm45.html?

The market price of gold might have fallen during the year but hoarding of the precious metal by individuals and central banks is approaching record levels.

In trading terms, it has been a tough year for the yellow metal. The price has fallen 28 per cent in 12 months. But the fundamentals, characteristics and attractions of gold are undiminished because we are in times of extreme intervention by governments, the outcome of which is completely unknown.

The first rule of investment is preservation of capital. The second is to search for gains or income that fits with your appetite for risk.

Gold has been the insurance of choice for thousands of years to satisfy the first rule, despite the fact that it generates no income and incurs costs for storage.

For other ways of protecting wealth, such as a bank account or government bonds, the rates of interest have been destroyed by monetary stimulus.

With negative rates on some of the safest bonds in the world, such as short-dated Swiss government bonds, investors now have to pay to lend Switzerland money and, once adjusting for inflation, investors are also paying the bank to hold their cash.

Gresham's Law

Against this backdrop, it seems odd that the price of gold has fallen so sharply. There are several reasons for this. Like all markets, over-exuberance had pushed the price higher than the fundamentals could support. At the same time, gold's big rival as a store of value, the US dollar, has recovered as strong economic growth supports the world's reserve currency.

One of the most interesting reasons that can be linked to the falling gold price is found in "Gresham's Law" that "bad money drives out good".

The Tudor financier, Thomas Gresham, found that: "When a government overvalues one type of money and undervalues another, the undervalued money will leave the country or disappear from circulation into hoards, while the overvalued money will flood into circulation."

Suppose, for example, there are in circulation gold coins that weigh one ounce of gold. After a few years some worn coins will weigh 0.9 ounces. In a free market, the worn coins would be valued at 90 per cent of the unused, or new coins, and the old coins would leave the market.

But if a government introduces artificial price control and decrees that all coins must be treated equally, the government has artificially overvalued coins that should trade at a 10 per cent discount, and undervalued the coins with a real physical value that is higher.

Consequently, any rational person will use the old and lighter coins for circulation and hoard the undervalued but new coins as a store of value.

This point is highlighted in the paper What Has Government Done to Our Money? by Murray Rothbard. Artificial currency devaluation is not new. Gresham was merely drawing conclusions from the studies of the Islamic scholar and historian, Al-Maqrizi, who noted the effect of currency devaluation during the Mamluk empire in Egypt.

Al-Maqrizi observed the effect of a liquidity crisis on the Mamluk dynasty in the early 15th century that caused money circulation to dry up.

The solution was mass-enforced currency devaluation through replacing the gold and silver-based dinar with copper coinage, or fulus, and for a period the Mamluk economy recovered rapidly as trade once again flowed freely.

However, inflation soon crept in and prices ran out of control as the currency was repeatedly debased. All the while, gold hoarding was taking place behind the scenes by those in power to protect their wealth.

Fast forward to the present time, and the money printing continues apace, while demand for physical gold has risen 24 per cent in 12 months. Central banks have been accelerating gold purchases since quantitative easing began in early 2009. Central banks added 93 tons of gold to reserves in the third quarter, according to the World Gold Council, and central bank purchases are expected to hit 400 tons for the full year.

Hoarders

China is hoarding huge amounts of gold – gross imports from Hong Kong in the year to date are more than 1113 tons, almost doubling from the imported amount in the same period last year.

The guardian of fiscal probity in Europe, the German Bundesbank, is repatriating 674 tons of gold from France and the US during the next seven years.

The gold price at $US1222 an ounce is certainly well above lows in 2001. But it is now priced in about the mid-range, when compared to oil and the stock market – and relative to government bonds and cash it is now more attractive as yields have fallen.

Gold is simply the best insurance against inflation, or deflation. "I would rather own gold than government bonds, high-yield bonds and equities. If this scenario [deflation] were to pass it would lead to even more money printing around the world," according to Marc Faber, the contrarian Swiss investor.

Investors do not need to understand gold prices to hold gold. Ben Bernanke, chairman of the Federal Reserve, told the Senate banking committee in July: "Nobody really understands gold prices and I don't pretend to really understand them either."

So how do investors get access? Luckily there are plenty of low-cost options. Popular physical gold exchange traded funds – or ETFs – include ETFS Physical Gold (PHGP) denominated in sterling and ETFS Physical Gold (PHAU) denominated in US dollars.

Also BullionVault and GoldMadeSimple offer low-cost services where small amounts of money can be deposited, which is then backed by gold.

For those who want to own physical gold coins or bars, there are established dealers such as ATS Bullion, BullionByPost, and Chard.

This column wouldn't recommend buying gold mining shares, or funds that invest in miners, as it is too high risk and does not provide the desired exposure.

The first rule of investing is capital preservation. A balanced portfolio should hold an allocation of about 5 per cent in assets such as gold. The future is uncertain and gold is the most effective insurance against that.

Telegraph, London

Source:http://www.theage.com.au/money/investing/still-lots-of-reasons-to-hold-gold-20131219-2zm45.html?

20 December 2013 - 专家：央行参与实物金囤积仍有理由购买黄金

Posted: 20 Dec 2013 04:54 PM PST

From:http://gold.jrj.com.cn/2013/12/20144616367991.shtml

今年一方面是金价大跌，一方面则是实物黄金需求大涨，甚至各国央行都参与其中。

由于受到美联储缩减债券购买规模的影响，今年以来金价已经下跌了大约27%，通胀始终没有起色使得黄金的避险保值功能的吸引力大打折扣。

对投资而言，首要是保本，其次是获得收益。几千年来黄金都是能满足前一条的物品，不过它本身却不能获得收益，并且还需要有储藏的花费。

今年金价的下跌事实上有很多理由，有分析师认为，首先就是金价本身在前几年被推的过高，超过了本身基本面因素可支撑的水平。而与此同时，美元又在美国经济有所增长的情况下开始恢复。

不过，金价下跌中最特别的原因恐怕还属格雷欣法则（Gresham's Law），即劣币驱逐良币。

比如如果流通的金币本身是价值1盎司的，在几年之后由于使用太久，它的价值就变成了0.9盎司，那么在自由市场上它的价值就低于新的金币，会被淘汰。然而，如果是政府引入的货币并且规定所有货币都是同等价值，那么旧的金币就被高于本身价值的价格所交易，人们自然会用旧的金币交易而囤积那些新的金币。而解决这一问题的方法，确实以纸币或者铜制钱币取代金银币成为货币。

然而一旦这些货币失去控制，通胀就会出现，囤积黄金以保护资产价值也就会出现。

在过去12个月，实物黄金需求增加了有约24%，各国央行也在2009年QE开始后加速囤积黄金。数据显示，今年第三季度各国央行黄金储备增加了93吨，今年全年各国央行购买黄金量可达400吨。

中国是目前实物黄金最大买家，今年至今从香港进入中国大陆的黄金已经超过了1113吨，几乎是去年的两倍。德国央行则将在未来7年中从法国和美国收回其674吨的黄金。

因此，专栏作家John Ficenec认为仍然有很多理由购买黄金，而黄金ETF则是比较简单的选择。此外，他认为黄金矿企股的股票风险过大，不推荐持有。他认为在投资组合中应加入5%的黄金配置。

Source:http://gold.jrj.com.cn/2013/12/20144616367991.shtml

20 December 2013 - Still lots of reasons to hold gold

20 December 2013 - Still lots of reasons to hold gold

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