Gold is For Those Seeking Portfolio Insurance: Gero

Release Date: 
Friday, June 19, 2015

Gold and Silver Prices
Gold held onto most of its Thursday gains which saw gold prices rise to four week highs to trade above $1200 per ounce on dovish statements from the Federal Reserve and concerns over a Greek exit from the Eurozone.

“Gold on Friday retained most of its gains from a sharp rally in the previous session, with prices on track for a second weekly jump, bolstered by the Federal Reserve's caution over US interest rate hikes and a softer dollar… Bullion got a boost, while the dollar slid, after Fed policymakers said on Wednesday a hike would be appropriate only after further improvement in the labour market and greater confidence that inflation would rise…  Bullion benefited as ‘investors likely flocked to safe-haven assets on concerns over increased risk of a Grexit following the failed talks, amid a more dovish Fed dot-plot chart’, said analysts at OCBC Bank, referring to the Greek debt crisis.” (“Gold firm near $1,200 on dovish Fed, set for 2nd weekly jump,” Reuters, 6/19/15.)

Gold finished the week up $19.00, closing at $1,201.30. Silver prices closed the week at $16.18, up $0.12.

Gold is For Those Seeking Portfolio Insurance: Gero
George Gero, Managing Director for RBC Wealth Management, explained why investors are turning to gold.

“Those who are buying gold now are coming from those countries whose currencies may be impaired. And of course if you happen to live in Greece and have funds in a Greek bank the chances are you’re buying gold because it’s liquid, it’s portable and has no political allegiance and is convertible into any currency. And, of course, gold is a major asset for those who need some sort of portfolio insurance going forward.” (“What You Need To Watch As A Gold Investor - RBC’s Gero,” Kitco, 6/18/15.)

Gold and Silver Are Cheap at Current Prices: Embry
Warning investors that the next financial crisis is “inevitable,” John Embry, Senior Investment Strategist at Sprott Asset Management, sees gold and silver as the two assets which will thrive.

“John Embry, Senior Investment Strategist at Sprott Asset Management, says there is no doubt another financial calamity is coming.  In fact, Embry says, ‘It’s unavoidable.  It’s inevitable is the word I would use.  There is no getting out of it.  If you thought 2008 was bad, and I thought it was terrible, this time, there is no ammunition left.  You can’t take interest rates any lower.  All you can do is print even more money.  That really didn’t work the last time.  The safety nets are largely gone if we do run into something untoward, and it could be fairly soon.  I don’t think there is really anything left to stave it off.  I don’t think they will refuel the period from 2015 to 2020 like they did after 2008.  I think it will be much uglier than that…’

“How will gold and silver do in the next meltdown?  Embry contends, “…  To me, the two really undervalued assets are gold and silver.  They are significantly undervalued and everybody hates them. . . .’ Embry goes on to charge, ‘I would say gold and silver are as cheap as they were when gold was $250 an ounce and silver was $5 per ounce.  They are the cheapest assets on the planet.’” (“Next Financial Calamity Unavoidable-John Embry,” USAWatchdog, 6/17/15.)

Next Financial Crisis May Cost Americans $26 Trillion
CNBC reports that, according to the Richmond Federal Reserve Bank, the next financial meltdown could cost American taxpayers nearly $26 trillion.

“As the U.S. finance system just keeps getting bigger, so does the amount to which taxpayers, in an extreme case, would be exposed should things go haywire again. The total portion of financial system liabilities that ‘are subject to explicit or implicit protection from loss by the federal government’ has grown to a record 60 percent, according to the latest calculations from the Richmond Federal Reserve's ‘Bailout Barometer.’

“Total price tag for those guaranteed liabilities: $25.9 trillion. That's a post-crisis high for a system that regulators and legislators have sought desperately to downsize… The liabilities come from banking and savings firms; credit unions, government-sponsored enterprises including Fannie Mae and Freddie Mac, private pension funds and other financial firms.” (“At stake in a financial system meltdown: $26 trillion?” CNBC, 6/16/15.)

Greek Moving Towards Euro Exit – Banks Lose 3 Billion Euros in Withdrawals
“Greece and its creditors -- the ECB, the IMF, and the European Commission -- seem further apart than ever after four hours of closed-door talks. Without a settlement, the ties still binding Greece to the currency bloc may begin to unravel with funding keeping Greek banks afloat under scrutiny.

“’The extreme economic uncertainty coupled with fears of currency change have driven withdrawals to unprecedented levels, wiping in four days the cushion of about 3 billion euros of the Greek banking system,’ said Nicholas Economides, professor of economics at New York University’s Stern School of Business. Asked if he could imagine Greece being forced out of the euro, Jeroen Dijsselbloem, the Dutch minister who leads the group of euro-area finance chiefs, said: ‘The way it goes now we’re going in that direction.’

“The gathering in Luxembourg highlighted the disconnect between what the Greek leadership sees as its truth -- vulturous creditors out to squeeze a small, vulnerable country -- and what the rest of the euro members say is the reality: Without further belt-tightening, it’s over for Greece. ‘We have come pretty much to a dead end,’ Finnish Finance Minister Alexander Stubb said on Thursday.” (“Greece Stumbling Toward Euro Exit as Meeting Ends in Rancor,” Bloomberg, 6/18/15.)

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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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