UBS: Gold Still a Portfolio Diversifier

Release Date: 
Friday, November 7, 2014

Gold and Silver Prices

Gold and silver prices rose slightly and retraced some of its  early week losses following a weaker than expected non-farm jobs report. “Gold rose more than 1 percent on Friday, rebounding from a 4-1/2 year low, after U.S. payrolls data missed forecasts and depressed the dollar…Gold had been under pressure for a week from a rising dollar, which has benefited from expectations that the Fed will move before other central banks to tighten monetary policy. The dollar surrendered some of those gains after data from the Labor Department showed the U.S. economy added 214,000 jobs last month, against expectations for 231,000.” (“Gold rises from 4-1/2-year low after U.S. jobs data,” Reuters, 11/7/14.)

Gold finished the week up $5.20, closing at $1,178.70. Silver prices closed the week at $15.81, down $0.36.

UBS: Gold Still a Portfolio Diversifier

The global banking and wealth management firm, UBS, told clients that gold continues to serve as a portfolio diversifier.

“Gold prices might be down this year but the metal still retains its function as a portfolio diversifier, says UBS. ‘Gold has been held historically in a portfolio as a diversifier, which means that when other assets are performing poorly, an investor counts on gold to do better,’ the bank says…‘So from a portfolio diversification perspective, gold is doing what is expected of it.’” (“UBS: ‘Gold Is Doing What Is Expected Of It’,” Kitco News, 11/7/14.)

China May Be Building Gold Reserves to Challenge U.S. Dollar

Some analysts believe that the Chinese central bank may be increasing its gold reserves as part of a plan to challenge the U.S. dollar as a world reserve currency.

“Alan Greenspan, who served at the helm of the Federal Reserve for nearly two decades, recently penned an op-ed for the Council on Foreign Relations discussing gold and its possible role in China, the world’s second-largest economy. He notes that if China converted only a ‘relatively modest part of its $4 trillion foreign exchange reserves into gold, the country’s currency could take on unexpected strength in today’s international financial system.’

“The People’s Bank of China has not formally disclosed any changes to its gold holdings in years, but it’s believed that the central bank is purchasing gold to diversify its reserve holdings…Some market participants also believe China is building up its gold reserves to challenge the U.S. dollar, which is currently the world’s reserve currency. A few years ago, China’s official news agency, Xinhua, said, ‘International supervision over the issue of U.S. dollars should be introduced and a new, stable and secured global reserve currency may also be an option to avert a catastrophe caused by any single country.’” (“Is China Hoarding Gold to Challenge the U.S. Dollar?” Wall Street Cheat Sheet, 11/3/14.)

Swiss Vote Could Impact Gold Market

An upcoming Swiss referendum regarding the Swiss National Bank’s gold holdings could rally gold prices.

“There are people in Switzerland who resent that the country sold away much of its gold last decade. They may be a splinter group of Swiss politics, but they’re a persistent bunch. And if they get their way in a referendum this month, these voters will make their presence known to gold traders around the world.

“The proposal from the ‘Save Our Swiss Gold’ proponents is simple: Force the central bank to build its bullion position up to at least 20 percent of total assets from 8 percent today. Holding 522 billion Swiss francs ($544 billion) of assets in its coffers, the Swiss National Bank would have to buy at least 1,500 tons of gold, costing about $56.3 billion at current prices, to get to the required threshold by 2019. Those purchases, equal to about 7 percent of annual global demand, would trigger an 18 percent rally.” (“1,500 Tons of Gold on the Line in Swiss Vote to Buy Back Bullion,” Bloomberg, 11/5/14.)

Silver Demand Up; U.S. Mint has Temporary Shortage of Silver American Eagles

The U.S. Mint reporting a surge in demand for silver coins due to lower prices.

“Sales of silver coins have picked up sharply as the price of precious metals declined, so much in fact that the U.S. Mint says it has run out of American Eagle silver bullion coins for now. ‘This is to inform you that due to the tremendous demand we have experienced in the last several weeks, the U.S. Mint has temporarily sold out of its American Eagle silver bullion coins,’ the Mint said in a memorandum to authorized purchasers late Wednesday. ‘We continue to produce 2014-dated coins and will advise you when additional inventory will be available for sale.’ The U.S. Mint’s website shows that sales of gold coins were strong in October, with the combined total of 88,500 ounces for American Eagle and Buffalo coins the most since this January. Silver Eagle coins sales were even stronger as the total of 5.79 million ounces was the most in a single month since January 2013.”

“‘In the physical markets, we are seeing quite a bit of activity in silver,’ said Edward Meir, commodities consultant with INTL FCStone, adding that one news service reported a ‘global scramble’ to buy coins and bars. He also cited reports that Asian retailers are ‘barely keeping up’ with supplies.” (“Silver Coins Sales Surge As Prices Decline; U.S. Mint Runs Out Of Inventory,” Kitco News, 11/6/14.)

Approach Year-End Planning with Confidence

As you prepare for end of year tax and retirement planning, consider whether your portfolio includes a recognized safe haven asset such as physical gold or silver. If not, learn how easy it is to add physical gold or silver to a self-directed IRA from Goldline, your trusted precious metals dealer for more than half a century.

Goldline has made it even easier to add gold and silver with its exclusive Express IRA® program. Goldline's Express IRA® program allows you to order your precious metals as soon as the self-directed IRA is opened. Further, your qualifying purchase of Goldline's limited production bullion coins comes with unprecedented price protection with Goldline's Price Shield℠. If the selling price of your coins decreases on the selected anniversary of your qualifying purchase, Goldline will automatically re-price the coins and make up the difference in additional exclusive bullion coins.

Plus, if you make a qualifying purchase in November, Goldline will offset your IRA fees for two full years with FREE, limited production bullion coins delivered directly to you.*

*Value of bullion coins based upon the current ask value

Goldline provides a wrap-up of the week's precious metals news along with important commentary on the American Advisor Week in Review audio program. Listen to the show below:

*Federal IRA tax laws are complex and may change from year to year. Goldline believes it is appropriate to have 5%-20% of retirement portfolio allocated to precious metals. Other individuals and institutions may recommend different percentages. As with any investment, you should consult your tax advisor before making a decision regarding precious metals IRA investments.

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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.

You should review Goldine's Account Agreement along with our risk disclosure booklet, Coin Facts for Investors and Collectors to Consider ®, prior to making your purchase. Goldline has a spread or price difference between our selling price, called the "ask", and our buy-back price, called the "bid". That spread varies depending on coin or bar you acquire. Spreads on 1 oz bullion coins, 90% silver dimes and quarters, and one ounce and larger bullion bars are 13%. All other coins have a spread of 28%. There is also a 1% liquidation fee when you sell your coins back to Goldline. The market must go up enough to overcome this spread before an actual profit is achieved. Precious metals and rare coins can increase or decrease in value. Past performance does not guarantee future results. Coins are a long-term, three- to five-year, preferably five- to ten-year investment. We believe precious metals are suitable for 5% to 20% of the average investment portfolio though others may recommend a different percentage.

To receive free information package on gold and precious metals investing, call Goldline at 1-800-963-9798.