This page has been archived and commenting is disabled.

Gold In Euros At New Record As Fears Of European Contagion Get Worse

Tyler Durden's picture





 

From Gold Core

Oxford Economics: Academic Proof that Gold is an Important Diversification Against Inflation & Deflation - Gold New Record Nomin

Gold is trading at $1,543.94/oz, €1,108.99/oz and £976.81/oz. 

Equities internationally and bonds in Greece, Ireland, Spain and
Italy have fallen this morning while gold rose to new record nominal
highs in euros and pounds (over EUR1,118/oz GBP980/oz respectively). The
Italian 10 year rose above 6% for the first time and the Spanish 10
year yield rose to 6.12%. US stock futures are pointing to losses on the
U.S. opening.

Cross Currency Rates

Irish government bonds have reached a new euro era record high with
the 10 year rising to 13.57% - up from 11.6% only 5 days ago. Ireland’s
“bail out” is clearly not working as contagion deepens in the eurozone.

Ireland Govt Bond 10 YR

Gold’s new record highs in euros and pounds was barely covered in the
non specialist financial press in Europe. The fact that the safe haven
remains the most poorly reported upon market in the world remains
bullish from a contrarian perspective.

The lack of coverage is due to a lack of knowledge as to gold’s
importance in a portfolio and also the blind belief that gold is a
bubble. Some financial ‘experts’, normally ones who failed to warn
regarding property bubbles, overvalued stocks and massive lack of
diversification in investment and pension portfolios, continue to
simplistically say that gold is a bubble and is ‘risky’.

A little knowledge remains a very dangerous thing.

Oxford Economics Report: Higher Allocations to Gold Can Benefit Portfolios in Deflation and Inflation

Oxford Economics have released a comprehensive and excellent report,
‘The impact of inflation and deflation on the case for gold’. It studies
gold’s benefit to investment and pension portfolios in inflation and
deflation. Founded in 1981, Oxford Economics is one of the world’s
foremost global forecasting and research consultancies. 

The report concurs with numerous other academic studies proving
gold’s importance in investment and pension portfolios – for both
enhancing returns but more importantly reducing risk.

The importance of owning gold has been proven conclusively in
numerous studies. The importance of owning gold in a properly
diversified portfolio has been shown in studies and academic papers by
Mercer Consulting, Bruno and Chincarini, Scherer, Baur and McDermott and
the asset allocation specialist Ibbotson.

Oxford Economics gold report shows how gold is a good hedge against inflation, as well as deflation. 

It says that investors should allocate 5 percent of their portfolio
to gold to best offset the effects of both inflation and deflation. 

The analysis reflects a simple model including gold, cash, equities,
bonds and commercial real estate. It goes on to add that the allocation
rises (10%) in a higher inflation scenario, as well as for risk-averse
investors in an environment of even weaker growth and lower inflation.

The entire report is excellent and well worth a read.

It concludes that gold’s price rise in recent years is justified by
the macroeconomic and monetary fundamentals and that higher prices are
more than possible.

“Historical analysis suggests gold could peak at levels even higher
than the current ones, and both past experience and our estimated
equation for the gold price also suggest that any ultimate adjustment
from peak levels may not be rapid.” 

This is especially the case given the risk of smaller nation sovereign defaults and “major sovereign defaults”. 

It also indentifies inflation risk from extremely loose monetary
policy, overheating emerging markets (such as China), the risks of a new
oil crises and a “loss of international investor confidence” in the U.S
dollar as factors likely to lead to higher gold prices.

The report concludes:
“Our scenario analysis using the Oxford Global Model shows
that gold may perform especially strongly in more extreme economic
scenarios featuring high inflation, a weak dollar and elevated levels of
financial stress. But gold also performs well in our deflation
scenario, where very high levels of financial stress triggered by
sovereign defaults in the EU causes a flight to safe assets.

As such, gold’s potential role as “risk insurance” in a balanced
investment portfolio is clear. Moreover, our optimisation analysis
suggests gold’s lack of correlation with other assets means that it has a
role to play in reducing the volatility of investment portfolios even
in more benign scenarios when its long-run real return is negative

Gold’s optimal portfolio allocation in our baseline scenario is
4-9%, depending on risk appetite. These considerations may partly
explain why gold’s use as an investment vehicle appears to be rising,
with investment-driven demand up to around 40% of the total in 2010 from
less than 15% in 2002. With central banks becoming net buyers of gold
in 2010 for the first time since the late 1980s, there seems to be
evidence of a reappraisal of gold’s value by various classes of
investors.

GoldCore Editors Note: 
To put it simply there is a huge amount of robust and compelling
evidence and academic proof of the important, if not crucial,
diversification benefits that gold brings to investment and pension
portfolios.

Whether gold is a bubble or not is not relevant. What is
relevant in these extremely uncertain times is the importance for people
to be properly diversified and own some gold to protect themselves from
macroeconomic, geopolitical and monetary risk and from the headwinds of
deflation, inflation and stagflation.

SILVER 
Silver is trading at $34.91/oz, €25.07/oz and £22.08/oz. 

PLATINUM GROUP METALS 
Platinum is trading at $1,709.75/oz, palladium at $753/oz and rhodium at $1,925/oz. 

NEWS
(MarketWatch) 
Gold futures gain on euro-zone debt fears

(Reuters Africa)
Gold steady on euro zone woes; dollar, equities weigh

(Wall Street Journal)
Gold Slips In Dollars Asia; Strong Dollar Weighs - (Higher in Euros)

COMMENTARY
(ZeroHedge)
Oxford
Economics Looks At The Role Of Gold Under Inflation And Deflation,
Finds Average Gold Holdings Should Be At Least 5% Of AUM

(CNBC)  
Jim Rogers: Silver Price to Go Much Higher, Currencies Can Disappear

(Barrons)
Manager Jim Rogers: U.S. Headed For Default ‘One Way Or The Other’

(Business Insider) 
This Is What Global Financial Interconnectedness Looks Like

(SilverDoctors)  
Will America Return to its Beginnings and Restore Gold and Silver as Money?

 


- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Tue, 07/12/2011 - 07:33 | Link to Comment freethinker4now
freethinker4now's picture

Music to my ears..I love the Sound of musiccccccccc

Tue, 07/12/2011 - 08:18 | Link to Comment ratso
ratso's picture

Finnish finance minister Urpilainen today insisted that the Greek bailout ca only go forward if there are loan guarantees in accordance with the agreements on which the new Finnish coalition government was formed. How this can be done has not been determined.  It may sink the current Greek plan.

Tue, 07/12/2011 - 11:43 | Link to Comment nontaxpayer
nontaxpayer's picture

A mere wool over Finnish taxpayers...a smoke screen so to speak. The bitch will sign. Gold - get you some.

Tue, 07/12/2011 - 07:38 | Link to Comment GeneMarchbanks
GeneMarchbanks's picture

Well, now that there is Academic proof, I really should consider getting some.

Oxford= Captain Obvious.

Tue, 07/12/2011 - 08:06 | Link to Comment RichyRoo
RichyRoo's picture

respect the sentiment, but now PhD Economists say...

contrarian?

Tue, 07/12/2011 - 07:38 | Link to Comment A.W.E.S.O.M.-O 4000
A.W.E.S.O.M.-O 4000's picture

Are they related to that other Oxford in England? If so they just lost their credibility.

Tue, 07/12/2011 - 09:47 | Link to Comment jerry_theking_lawler
jerry_theking_lawler's picture

nah, they are now related to the oxford in OH and the oxford in MS....they just regained their credibility....

Tue, 07/12/2011 - 07:41 | Link to Comment Dr. Richard Head
Dr. Richard Head's picture

Just imagine the nominal value of gold when it does reach its bubble stage. Like a priest on viagara during alter boy camp, gold be going up.

Tue, 07/12/2011 - 07:44 | Link to Comment weinerdog43
weinerdog43's picture

That is a disturbing, yet hilarious analogy.  Well done.

Tue, 07/12/2011 - 07:52 | Link to Comment francis_sawyer
francis_sawyer's picture

That analogy sort of redefines the James Coburn movie line...

"candy @sses & jesus freaks"

Tue, 07/12/2011 - 07:53 | Link to Comment Sean7k
Sean7k's picture

Great analogy! 

Tue, 07/12/2011 - 07:45 | Link to Comment Zero Govt
Zero Govt's picture

Trichet said last year he would stop contagion.. what's this, no it can't be!!!

Tue, 07/12/2011 - 07:47 | Link to Comment razorthin
razorthin's picture

Again with AH ES gaps and retracements before the open.  They'll never give a good short the satisfaction.

Tue, 07/12/2011 - 07:48 | Link to Comment misterc
misterc's picture

Errr... looking at the concept of CDS (collateral), am I right thinking that an Italian downgrade would likely trigger a CDS explosion for all the intertwined institutions couldn't possibly put up all that new collateral, just to make up for the downgrade, not even the default itself?

Tue, 07/12/2011 - 07:55 | Link to Comment GeneMarchbanks
GeneMarchbanks's picture

Um... on the surface it appears so, but(as someone on this board pointed out) it is a game of Calvin Ball and so you gotta keep up with the rules.

Tue, 07/12/2011 - 07:49 | Link to Comment Hedge Jobs
Hedge Jobs's picture

eurozone is a disaster. interestingly (on Bloomberg) Iceland just reported a Eurobond auction was twice over subscribed and it now costs less  to insure Icelandic debt than it does Italian or Spanish debt. Seriously, tell these greedy bankers and their paid for politicians to fuck off and like Iceland we might actually start to see a real recovery.

Tue, 07/12/2011 - 07:55 | Link to Comment razorthin
razorthin's picture

+1000

Tue, 07/12/2011 - 08:02 | Link to Comment Oh regional Indian
Oh regional Indian's picture

Excellent point. I'm sure that news will not get much coverage.

ORI

Tue, 07/12/2011 - 07:51 | Link to Comment Sean7k
Sean7k's picture

Wall Street Journal Headline, "CHINA BUYS EUROPE!"

Now, where to put all those europeans...probably could disperse them equally to Africa and South America. I'm not sure if a trip to Italy will retain its' cache, but the prices are bound to be better.

Tue, 07/12/2011 - 07:56 | Link to Comment Oh regional Indian
Oh regional Indian's picture

Nice. And all that. But with headlines like this, the can-kickability of the Cartel becomes so obvious.
Oil, PM's, Currencies. That pretty much covers the money front.
Add tin-pot dick-taters, compromised politicians... the works...

So, pretty meaningless. Near Term anything is just so open to manipulation.

ORI

http://aadivaahan.wordpress.com/2011/07/08/july-15th-aug-15th-month-long...

Tue, 07/12/2011 - 07:56 | Link to Comment MiningJunkie
MiningJunkie's picture

Gartman just exited half positions because he claims it is now a "crowded trade". Brought to you by the advisor that shorted copper at the lows a couple of weeks ago. Just buy bullion and sit back. As Richard Russell has stated numerous times, this bull will do anything and everything to buck you off.

Tue, 07/12/2011 - 08:44 | Link to Comment GetZeeGold
GetZeeGold's picture

 

Gartman is such a pussy.....he needs to packup and leave.

 

Tue, 07/12/2011 - 09:30 | Link to Comment oddjob
oddjob's picture

Gartman can sell half his gold forever. He is truly the most vile shill out there.

Tue, 07/12/2011 - 09:27 | Link to Comment hamurobby
hamurobby's picture

If thats "5%", I tote a ten man tent.

Tue, 07/12/2011 - 08:04 | Link to Comment FischerBlack
FischerBlack's picture

This just in, Oxford economics, using chromatographic spectral analysis, has confirmed with 99% certainty that gold has a yellowish color.

Tue, 07/12/2011 - 08:08 | Link to Comment GubbermintWorker
GubbermintWorker's picture

It says that investors should allocate 500 percent of their portfolio to gold to best offset the effects of both inflation and deflation.

 

There, fixed that for them.

Tue, 07/12/2011 - 08:12 | Link to Comment Sean7k
Sean7k's picture

Gubbermint worker and 500% of portfolio, now the national debt is starting to make sense...:)

Tue, 07/12/2011 - 09:25 | Link to Comment Sudden Debt
Sudden Debt's picture

and like that, hedges are created...

Can you put that on paper so I know it has true value? :)

 

Tue, 07/12/2011 - 09:51 | Link to Comment Smiddywesson
Smiddywesson's picture

Gold should not be 100% of any portfolio.  Food should be the majority of your portfolio.

In a real bad meltdown, which is what any meltdown would be in a fragile society like ours, you would need massive stores of food for each person to last long enough for things to settle.  Food for the win.  It's a risk free trade.

It may only take $5 to dig silver out of the ground, but it takes nothing at all to dig gold out of a withered skeleton's pocket.

Tue, 07/12/2011 - 11:08 | Link to Comment Hugh_Jorgan
Hugh_Jorgan's picture

I like the "4 G Philosophy"

God

Guns

Grub

Gold

and in that order...

 

Tue, 07/12/2011 - 11:19 | Link to Comment Hugh_Jorgan
Hugh_Jorgan's picture

.

 

Tue, 07/12/2011 - 11:19 | Link to Comment Hugh_Jorgan
Hugh_Jorgan's picture

.

 

Tue, 07/12/2011 - 11:17 | Link to Comment Hugh_Jorgan
Hugh_Jorgan's picture

.

 

Tue, 07/12/2011 - 11:16 | Link to Comment Hugh_Jorgan
Hugh_Jorgan's picture

.

 

Tue, 07/12/2011 - 11:17 | Link to Comment Hugh_Jorgan
Hugh_Jorgan's picture

.

 

Tue, 07/12/2011 - 11:22 | Link to Comment mess nonster
mess nonster's picture

Yes , yield upcreep shows the shocking instability of criminal ponzi world- everyone's going gold, in a panic. Yesterday's safe haven was Treasuries, but yield creep will happen there, soon (paybacks are a bitch, except when you default) + (Aug 2, Obama's b-day), so gold is all that's left. Of course there will be NO physical delivery, as all fiat assets get devoured in debt-destruction tornado. All the gold frenzy will do is suck any avaialable capital into another massive black hole, thus adding more pressure to the already inescapable deflationary dynamic happening everywhere real people live, but not in the vampire-banking world, or in ZeroHedge-land, where hyper-inflation continues its rampage across the virtual landscape.

Tue, 07/12/2011 - 11:30 | Link to Comment mess nonster
mess nonster's picture

To re-phrase- What does oe call it when your house is worthless, and your paycheck remains the same, (or is less) and any investments (except gold) aren't making any money at all, but food and fuel prices have gone through the roof? Why don;t we just call it "GrapesofWrath-tion"???

Tue, 07/12/2011 - 11:32 | Link to Comment mess nonster
mess nonster's picture

To re-phrase- What does oe call it when your house is worthless, and your paycheck remains the same, (or is less) and any investments (except gold) aren't making any money at all, but food and fuel prices have gone through the roof? Why don;t we just call it "GrapesofWrath-tion"???

Do NOT follow this link or you will be banned from the site!