WGC: Gold Helps Reduce Risk, Improve Portfolio Performance

Release Date: 
Friday, June 20, 2014

Gold and Silver Prices

Gold prices shot through the $1300 level fueled by the growing Iraqi civil war and corresponding threat to the world oil supply along with the Fed’s announcement that low interest rates would continue. “Fed Chairwoman Janet Yellen gave a positive assessment of the U.S. economy and reiterated that rates would stay low for a long time. The comments surprised some traders, who had bet against gold expecting a more hawkish view from the Fed, forcing them to cut their losses Thursday by purchasing the metal…Gold and silver also got a boost from continued violence in Iraq, as well as rising tensions between Ukraine and Russia...Some investors buy gold in times of economic or geopolitical uncertainty, believing the metal will hold its value better than other assets. ‘The civil war in Iraq remains a major market factor and continues to prompt some...safe-haven buying in gold,’ said Jim Wyckoff, a senior analyst at Kitco.com, in a note to clients.” (“Gold Futures Hit Three-Week High After Fed Meeting,” Wall Street Journal, 6/19/14.)

Gold finished the week at $1,315.70, closing up $38.80. Silver prices closed up $1.21, at $20.98.

WGC: Gold Helps Reduce Risk, Improve Portfolio Performance

In its newly released Gold Investor—Volume 6, the World Gold Council discussed how gold may reduce risk and improve performance in a diversified portfolio.

“Even under the assumption that gold’s annual return in nominal terms is a modest 2%-4% over the long run–lower than its historical return and akin to the global rate of inflation–gold’s benefits mean that including gold can improve overall portfolio performance. The key lies in gold’s ability to: Diversify a portfolio and consequently lower portfolio volatility; Reduce losses in periods of financial turmoil; Preserve purchasing power through its ready liquidity.”

“Gold can help investors manage portfolio risk. The key is the way that gold interacts with other assets. Two factors are particularly important: Low correlation with equities…gold has low correlations–lower than that of assets that are often seen as ‘diversifiers’–to stocks over long periods of time. Outperformance during crises. Gold tends to outperform other assets in periods of economic and financial turmoil. This gives investors a way to reduce risk when it is most needed.”

“Gold’s unique supply-and-demand factors lower volatility and deliver returns. The drivers of demand for gold work at all stages of the business cycle. Gold’s unique demand and supply dynamics ensure its role as a true diversifier for investors.” (“Gold Investor—Volume 6,” World Gold Council, 6/19/14.)

Aden Sisters: Buy “Cheap” Gold Now and Hold for the Future

Noted analysts and newsletter writers Mary Anne and Pamela Aden explained how gold prices could rise dramatically if gold becomes part of the international monetary system.

“If gold ends up playing a serious monetary role in the world, we’ll see its value soar. We’ve often said that gold could become part of the monetary system along with several currencies. The world is heading in this direction…If we take the partial backing as a more conservative level, we could still see gold 2 to 4 or more times higher than it is today. The point is, gold has intrinsic value, and silver is growing in this direction as well. We believe it’s wise to buy gold and silver when they are cheap, like they are today, and hold them for years.”

The Aden Sisters also believe other factors are positive for gold. “Three large economies now have a zero-interest rate policy for the unforeseeable future. This is keeping real interest rates negative, which is a bullish backdrop for gold, not to mention the unprecedented global monetary system we have today. You’ll remember that gold hit a six month high last March when Russia took over the Crimean peninsula. And while tension has eased, this conflict is far from over. Russia has big plans and time. This will clearly continue to boost the gold price going forward, as well as the other growing hot spots, like Iraq, in the world today.” (“Aden Forecast—June 2014,” The Aden Forecast, 6/12/14.)

Survey: Majority Highly Bullish on Gold Prices for Coming Weeks

A strong majority of participants in the Kitco News Gold Survey forecast higher prices next week, as many expect the yellow metal to build on momentum uncovered this week. “‘The gold market has finally woken up to the fact that the Federal Reserve is going to continue to be very accommodative. Fed Chairwoman Janet Yellen herself (made) clear that any interest hikes are some time into the future and inferred that higher inflation is not a real concern of hers. So gold jumped after the (Federal) Open Market Committee meeting put out its statement and continued rallying. Iraq supports gold but is not the primary reason gold has moved up,’ said Adrian Day, chairman and chief executive officer of Adrian Day Asset Management.” (“Survey Participants Heavily Bullish On Gold Prices For Next Week,” Forbes, 6/20/14.)

Goldline’s Express IRA℠ Program

Many Goldline clients choose to include precious metals as part of their retirement planning especially during times of economic crisis and uncertainty.* Goldline’s Express IRA℠ allows clients to acquire precious metals on their schedule; they no longer have to wait for your self-directed IRA to be funded before getting started.

Goldline's Express IRA℠ not only provides clients with the ability to diversify their IRA on an expedited basis, clients can also qualify for Goldline's ground-breaking Two-Way Price Guarantee Program℠ when they acquire $10,000 or more of our exclusive bullion coins. When an Express IRA purchase qualifies for Goldline's Two-Way Price Guarantee Program℠ clients are protected on short-term upside and downside market movement: they can either call to reprice their coins if the selling price falls (up to a maximum of 28 days depending on the size of the purchase) or, if the selling price of the coins increase during the qualifying period, clients can call Goldline to acquire additional coins at the original selling price.

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.

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