Gold is Strong Diversifier for U.S. Investor – Yahoo Finance

Release Date: 
Friday, April 15, 2016

Gold and Silver Prices
Gold prices fell on a stronger dollar but recovered some of its earlier losses to end the week relatively flat.

“Gold prices pulled back to $1,208.50 while they consolidated. They have since rebounded to $1,263 but have stalled again…  We remain bullish towards gold generally because we feel the financial markets are vulnerable and we see negative interest rates as a positive for gold. More to the point, we sense a significant shift in sentiment from institutional investors, who have been buying ETFs aggressively this year.

“For now physical demand in Asia seems weak but lower prices may lead to a recovery in demand in Asia. If so, ETF buyers may have to compete with Asian buyers for physical gold….” (“Prices consolidate; expect dips to be bought,” thebulliondesk, 4/15/16.)

Gold ended the week down $4.30, closing at $1,235.10. Silver prices closed at $16.33, up $0.87.

Gold is Strong Diversifier for U.S. Investor – Yahoo Finance
Yahoo Finance explained that gold, an important portfolio diversifier, is expected to rise in today’s economy.

“The price of gold glittered in early 2016, soaring 17 percent in the first quarter… The key question for investors, of course, is can the rally in gold continue? Gold is viewed as a hedge against market instability and declines and is also viewed as an alternative currency by some… There are several reasons bullish analysts believe gold can continue to shine.

“Investment demand for gold has been climbing amid concerns over the move to negative interest rates in the eurozone and Japan. Central banks have pushed some key interest rates into negative territory in an effort to stimulate economic growth…

“European demand for gold has picked up over the last two years as the Greek debt crisis continues to linger… Chinese and Indian demand for gold remains strong…

“Some analysts make a case that there could be room in an individual's portfolio for an allocation toward gold. Gold has historically acted as a strong diversification tool for the average U.S. investor… At the end of the day having some gold related assets as part of your portfolio could act as a type of insurance.

“’Prudence dictates that one have a core position in precious metals," [senior financial analyst] Pahla says. ‘You don't purchase insurance on your home because you know your home is going to burn down. You purchase it because in the event it does burn down, you are protected. Gold bullion should be viewed along the same lines.’” (“Will Gold Continue to Shine?” Yahoo! Finance, 4/12/15.)

Perfect Storm May Send Gold to $3000/oz – Parrilla
Author and precious metals specialist Diego Parrilla told attendees of the Dubai Precious Metals Conference that reckless central bank policies may send gold prices to $3,000 per ounce in the next three years.

“The price of gold could go up above $3,000 per troy ounce in three years, a precious metals expert said on Monday. Speaking at the Dubai Precious Metals Conference, Dr. Diego Parrilla, co-author of 'The Energy World is Flat,' said ‘a perfect storm for gold is brewing’ as central banks have reached the point of no return.

“’Central banks continue to push and test the limits of monetary policy, credit markets, and fiat currencies, which could result in gold prices above $3,000/oz within 3 years,’ said Parrilla. According to Parrilla, the big problem is that monetary policy is contagious and central bankers no longer have any bullets left. Central banks have no room to ease aggressively as they are already stretched….” (“Expert sees gold price crossing $3,000 in 3 years,” Khaleej Times, 4/11/6.)

Gold Will Advance to All-Time Highs – Tocqueville
Wealth manager Tocqueville Asset Management, writing in its quarterly gold strategy newsletter, advised its investors that gold is poised to reach all time highs.

“It appears to us that the nearly five-year decline in the precious metals sector has concluded, and that the stage is set for a renewed advance towards all-time highs. What is the investment rationale to support our view?

1. The war on savings and capital being conducted by central banks seems likely to drive investors towards alternative safe assets. We believe that prominent among the available options is gold.
2. At the zero interest-rate boundary, bonds are no longer capable of providing a stability hedge for equity portfolios; investors may look to gold to fill that vacuum.
3. A deepening shortage of physical gold means that even modest capital inflows into precious metals should drive an outsized price response…

“We believe that the stage is set for powerful new advance in gold prices. The extreme monetary policies responsible for boosting financial-asset prices in recent years seem to be running out of steam. There seems to be growing evidence that investor confidence in these policies is fading. Policymakers appear to be grasping at straws such as digital cash, negative nominal rates, and the elimination of large-denomination cash notes… It seems clear to us that this continuing reinvention of policy is a never-ending experiment; and there appears to be no clear path for reversal or policy normalization…  We continue to recommend exposure to physical gold … which would be the prime beneficiary of a renewed advance in precious-metals prices….”  (Tocqueville Gold Strategy Investor Letter, 4/16/16.)

China Aggressively Acquiring World’s Gold Mines – WSJ
The Wall Street Journal reported that China is acquiring gold mines throughout the world, further bolstering its influence on the world gold market.

“Chinese gold miners are aggressively scouting for overseas acquisitions, encouraged by historically low gold prices that could help them scoop up assets cheaply…

“If cash-rich Chinese gold miners embark on an asset-buying spree, China could reduce its dependency on other international producers for supplies and increase its heft in global gold markets… China consumes around 1,000 tons of gold annually and accounts for nearly 30% of global demand, according to the World Gold Council. The nation produces around 450 tons of gold annually….” (“China Goes Prospecting for World’s Gold Mines,” WJS, 4/10/16.)

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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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