Hedge Funds Move to Gold for Safe Haven – Bloomberg

Release Date: 
Friday, January 29, 2016

Gold and Silver Prices
Gold prices slipped on Friday but nonetheless posted an impressive gain of more than $50, or 4.8%, for January.

“For most commodity investors, January was one more bad month in a years-long bear market. Gold was the exception. Bullion for immediate delivery rallied 5 percent in January, the best gain in a year…

“Turmoil across Chinese financial markets, plunging oil prices and signs of softening economic growth in the U.S. left investors reeling in January, boosting demand for traditional safe-haven assets like gold. While losses deepened in other metals, gold outperformed... ‘This year has seen tough equity markets, starting in China and spreading across the world…," Simona Gambarini, a commodities economist at Capital Economics in London, said by phone. "That’s affected gold in a positive way.’” (“Gold Triumphs Among Metals With Best Monthly Rally in a Year,” Gold-Eagle, 1/29/16.)

Gold ended the week up $19.80, closing at $1,118.80. Silver prices closed at $14.34, up $0.24.

Hedge Funds Move to Gold for Safe Haven – Bloomberg
Hedge funds and other significant investors are shifting their assets to gold to reduce their risk in times of global volatility.

“Hedge funds and other large speculators more than doubled their net-long position in bullion last week, just three weeks after they were the most-bearish ever… Bullion has seen a revival of its appeal as a haven after being mainly ignored last year in the face of the Paris terror attacks in November and the Greek bailout negotiations in July. This time around, concerns about global markets will support the metal, Citigroup Inc. analysts led by Ed Morse said last week as they raised their 2016 price forecast.

“’People have become complacent about risks, whether it’s macroeconomic and geopolitical,’ said George Milling-Stanley, the Boston-based head of gold investments at State Street Global Advisors, which oversees $2.4 trillion. ‘What’s out of fashion may be coming back. That atmosphere of people feeling completely calm and untroubled, I think, is starting to go away. Gold is a very good risk-off trade, and I think people are starting to look very, very carefully at the risky positions that they have on a number of other markets…’

“The attraction to gold this month ‘could partly have to do with re-balancing investors’ portfolio,’ said Kevin Caron, a Florham Park, New Jersey-based market strategist and portfolio manager who helps oversee $180 billion at Stifel Nicolaus & Co. ‘An entry price here nearer to $1,000 than $2,000 makes a lot more sense.’” (“Gold Is Back in Fashion After a $15 Trillion Global Selloff,” Bloomberg Business, 1/24/16.)

Gold Should be Part of Your Retirement Portfolio – Brecht
Kira Brecht, managing editor of TraderPlanet and Kitco commentator, told investors that gold should be part of a diversified retirement portfolio.

“How much have you saved for retirement? If you are like most Americans, probably not enough…

Retirement is a different game for generations of citizens today. Company pensions in the private sector are few and far between, which leaves the old-school model of the "three-legged stool" obsolete. Financial planners of yester-year would point to the three potential income streams retirees can lean on during retirement years: 1.
Company pensions 2. Social Security 3. Your own savings.

“Guess what. The stool has fallen down and is broken. Unless you are an American working in the public sector, you probably aren't getting a pension. So, what's next? Social Security. Uh, bad news there too. According to a recent report from the Congressional Budget Office, under current law they project that Social Security’s trust funds will be exhausted in 2029…

“What's the third leg? Your savings. Now this is where it is time to get serious…

“Some simple rules of wealth building include pay yourself first. An argument can be made for diversification into gold as part of your retirement portfolio. Gold is a currency without a country and can help maintain purchasing power. The value of paper money rises and falls. Declines in the U.S. dollar means you can purchase less.  The dollar has been rising over the past year, but all markets go in cycles including currencies…

“Another factor in favor of gold as part of your retirement portfolio is inflation. Gold is a hedge against inflation. While inflation is low now, again markets and economies move in cycles. In the 1980's inflation levels hit 14% in the United States. Inflation is a wealth killer. A priority on your retirement funds should be getting it back and preserving your wealth, your purchasing power and protection against inflation.

“What's in your portfolio now? Time to make a plan.” (“Is Gold Part Of Your Retirement Plan? Maybe It Should Be,” Kitco Commentaries, 1/22/16.)

China Buys Gold to Spread Risk, Reduce Volatility
Bloomberg Business reported that China is expected to continue its diversification into gold as part of its strategy to reduce risk and volatility.

“China will press on with gold purchases this year and the central bank will probably scoop up more than 200 metric tons as the country seeks to diversify its reserves, according to an estimate from Barclays Plc. Bullion purchases by the People’s Bank of China in recent months have been very steady, which is ‘particularly impressive given that China’s total forex reserve has recorded large declines…’

“’The PBOC will continue to diversify its portfolio,’ Wayne Gordon, executive director for commodities and forex at UBS Wealth Management, said in an e-mail. Buying gold helps the central bank to spread risk and reduce volatility, he said.
Asia’s largest economy has expanded its bullion stash by 6.3 percent since announcing in July a 57 percent jump since 2009….” (“PBOC May Buy 215 Tons of Gold This Year, Barclays Forecasts,” Bloomberg Business, 1/27/16.)

Gold’s Historic Performance Signals New Bull Market – WGC
The World Gold Council’s director of investment research, Juan Carlos Artigas, explained how gold’s historic trends indicate a new bull market is beginning.

“Gold prices have had a good run so far this year and one gold market analyst noted that historical data may be signaling a bull market is coming.

“In a webinar Thursday afternoon, the World Gold Council’s director of investment research Juan Carlos Artigas said that looking back at gold’s performance since the 1970s; the five bear markets that took place had similar characteristics “in terms of length and magnitude. Artigas noted that the historical median length for these bear runs was between 47-52 months.

“’We’re more or less in the 50-month mark,” he added, which, not ruling out lower prices later in the year, could imply that a bull market is not too far ahead….” (“History May Be Signaling A Bull Market In Gold Is Coming – Webinar,” Kitco News, 1/29/16.)

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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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