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Pimco Increases Gold Allocation From 10.5% To 11.5% In Commodity Fund

Tyler Durden's picture




 

Moments ago, the FOMC members formalized their opinion on where inflation is heading: "Most members continued to anticipate that, with longer-term inflation expectations stable and the existing slack in resource utilization being taken up very gradually, inflation would run over the medium term at a rate at or below the Committee’s objective of 2 percent." The only conclusion one can derive from this is that since the perpetually wrong FOMC committee, which has never accurately predicted any one thing in its entire history, sees little to no inflation, inflation is most likely about to soar. A convenient independent confirmation of this assumption comes from none other than bond manager PIMCO which moments ago announce that it was adding to its gold holdings "on inflation concerns...as it bets that global inflation rates will pick up over the next three to five years." Specifically, "The Pimco Commodity Real Return Strategy Fund, which has about $20 billion in assets, has increased its gold holdings to 11.5% of total assets recently, from 10.5% two months ago, and has been adding to the position when gold prices dipped toward $1,500 a troy ounce, says Nic Johnson, the fund's co-portfolio manager." And with global asset managers allocating about 1% of their AUM to the precious metal, should the majority of them copycat PIMCO in this move, then gold would cross the psychological $2,000 barrier in minutes. The irony is that for a bond manager, which Pimco just happens to be the biggest in the world, inflation is your worst friend. So acknowledging its imminent creep, is hardly "talking one's book."

More from Dow Jones:

The money manager predicts global inflation rates will run higher, on average, over the next three to five years than what the world had witnessed over the past 25 years. However, the risk won't arise for another 12 months, during which inflation should be subdued.

 

Pimco has aired its concerns about inflation in the past and moved to avoid longer-dated Treasury bonds in favor of inflation-protected securities. But the move toward gold is recent and reflects an escalation in the fund manager's concern.

 

In the face of such risks, "broadly speaking, we prefer owning real assets as opposed to financial assets," Mr. Johnson told Dow Jones Newswires in a recent interview. Three of Pimco's portfolio managers, including the head of the commodities group Mihir Worah and Mr. Johnson, have been on a 17-city U.S. tour since June to raise awareness among institutional investors and larger financial advisers.

 

Their message: the trifecta of loose monetary policy, persistently high levels of sovereign debt and rising commodity prices will drive inflation higher.

 

Pimco expects currency devaluation to remain a central theme in the market as global liquidity swells thanks to continued easy-money efforts from the world's central banks. Interest rates, meanwhile, will need to stay low as government debt runs at a high proportion to the overall economy.

 

"Gold is the currency without a printing press," Mr. Johnson says.

 

Moreover, investors should purchase gold before inflation rates rise, as "it's the process of going from 2% inflation to 4% inflation that's going to drive gold higher," he says.

 

... 

 

To guard their wealth against the "silent tax," as inflation is often called, Pimco recommends investors stock up on store-of-value commodities like gold and platinum, and hard assets like real-estate investment trusts.

It would appear that with the implied promise from the FOMC that Bernanke will not rest until corn is in the double digits, gold has decided to finally break out above its 200 DMA, and is now headed higher as the coy foreplay of the past 6 months has finally ended.

 

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Wed, 08/22/2012 - 14:47 | 2728273 The Wizard of Oz
The Wizard of Oz's picture

GOLD BITCHEZ!!!!

Wed, 08/22/2012 - 14:55 | 2728295 strannick
strannick's picture

Soros, Paulson and now the king of anti-gold universe, Bond Meister Bill moving towards gold and on a FOMC minutes with no QE, gold still goes up. Ergo, Gold Bitchez 2000

Wed, 08/22/2012 - 15:02 | 2728338 macholatte
macholatte's picture

 

 

The Federal Reserve is likely to deliver another round of monetary stimulus "fairly soon" unless the economy improves considerably, minutes from the central bank's August meeting show.

U.S. Fed ready to ease "fairly soon," minutes show

http://in.reuters.com/article/2012/08/22/usa-fed-minutes-idINDEE87L0E920...

Wed, 08/22/2012 - 15:02 | 2728342 Doña K
Doña K's picture

And in what type of gold investment may we ask does the fund employ?

Physical and where is it deposited? ETF's? Futures? Other?

Can we be enlightened?

Wed, 08/22/2012 - 16:24 | 2728601 smiler03
Wed, 08/22/2012 - 16:54 | 2728701 No Euros please...
No Euros please we're British's picture

PIMCO need to take care, there's a lot of gold involved in boating accidents off Newport Beach.

Thu, 08/23/2012 - 01:35 | 2729482 zhandax
zhandax's picture

Don't worry, they just asked for delivery on 300 COMEX contracts.  How many times do you think they will have to sell GLD and buy more futures before they get 3.7 tonnes?  That's either a long wait or a lot of minor boating accidents.

Wed, 08/22/2012 - 15:00 | 2728327 stocktivity
stocktivity's picture

Silver also taking off again this afternoon as of 3pm.

Wed, 08/22/2012 - 15:13 | 2728385 Robot Traders Mom
Robot Traders Mom's picture

I literally just bet my kid $50 the first comment would be "GOLD BITCHEZ!"

 

Thank you, ZH and Wiz

Wed, 08/22/2012 - 16:04 | 2728568 Spigot
Spigot's picture

Happy to help. Its good to have things you can count on in the changing times we live in ...

Wed, 08/22/2012 - 18:18 | 2728862 wesayukcom
wesayukcom's picture

Fly me to the moon ! Here we go.

Listening to capital account the other day it would appear if you are a believer in kondratieff theory we started the winter phase (likley to last 17 odd years) in appx 2000 at the  start of the recent and long gold bull run which will have probably another 5 years to run before major bubble alert.

Summarised
=========

“Kondratieff Winters historically feature high volatility, slow to negative growth, de-levering (by consumers, corporations, and governments,) hoarding of cash by banks, asset deflation, and economic depressions due to bursting of unsustainable credit bubbles.” (~8min) The transition to winter occurred in early 2000. Each Kondratieff cycle lasts between 15 and 17 years. The bottoming out of this winter cycle should occur in 2016 or 2017. Very difficult times are directly ahead of us.

http://rt.com/programs/capital-account/summer-kondratieff-winter-baxter/

Talk of a bubble teritory by MSM is way way too early the chart for both Ag and Au has not even started the parabolic phase which is characteristic of a bubblemania.  We got 5 years to accumulate like the central banks are doing.

Talk of gold as collateral and money by major players is music to our ears.  It's all going according to plan !! keep on averaging up and down monthly and you can't go wrong these next few years i say 3-5 are going to be magical for holders of PMs. Pity the ill informed.

ps a date for your diaries 12 September. It's make or break for Germany and the dilema of whether Germany high Judges agree to the principle of a FED for Europe....

Wed, 08/22/2012 - 14:50 | 2728286 fonzannoon
fonzannoon's picture

1% Increase? Grow a pair PIMCO.

Wed, 08/22/2012 - 16:05 | 2728572 Spigot
Spigot's picture

double UP, step by step

hear the silence = 10.5% and now 11.5% allocation to the shiny yellow dog...arf!

Wed, 08/22/2012 - 14:51 | 2728287 yabyum
yabyum's picture

"talking the book" I've read the book! and it's title is "PM's Bitchez now!"

Wed, 08/22/2012 - 14:51 | 2728289 devo
devo's picture

Gold to the moon.

Wed, 08/22/2012 - 15:05 | 2728359 Big Corked Boots
Big Corked Boots's picture

Paper to the earth.

Wed, 08/22/2012 - 16:00 | 2728548 FranSix
Wed, 08/22/2012 - 14:52 | 2728298 Frank N. Beans
Frank N. Beans's picture

that 'splains why da gold just shot straight up to da sky 

Wed, 08/22/2012 - 14:54 | 2728301 MsCreant
MsCreant's picture

Why the fuck announce this if you are buying? Hmmm????

Wed, 08/22/2012 - 14:56 | 2728311 MsCreant
MsCreant's picture

I have been on this roller coaster before. Pump, then dump. If you want to ride up a bit and sell at the tiny top like these fuckers will do, go ahead.

It will drop below 1600 within a couple weeks, again.

Wed, 08/22/2012 - 15:00 | 2728329 Al Gorerhythm
Al Gorerhythm's picture

A breakout test will be on the cards but my fear is that this may be the endgame for them and I have not had the tools to convince enough people of the peril. Still a kook in the eyes of family, despite years of being "right".

Wed, 08/22/2012 - 15:06 | 2728363 MsCreant
MsCreant's picture

It keeps looking, smelling, tasting, and feeling like an endgame for so long now. It is a Weird Al Gorerhythm, so to speak. ;-(

I had the experience you are talking about just yesterday. My colleague is convinced he has been alive so long now that even if there is a crash, markets always come back and the trick is to stay in and ride it out.

What can you even do with that logic?

Wed, 08/22/2012 - 15:17 | 2728387 Cognitive Dissonance
Cognitive Dissonance's picture

You do nothing other than to wish him/her good luck. Only after the collective memory is washed clean (usually by death or dementia) can a new round of beat down pain be administered.

The last of "The Great Depression" voices are now just whimpers in the wind. Time for "The Greater Depression" to begin.

Wed, 08/22/2012 - 15:53 | 2728522 ZerOhead
ZerOhead's picture

A global "Greater Depression" would be the best of all possible outcomes at this point in time.

If casino/voodoo economic policies are not stopped (no evidence to suggest this yet) then this sucker will likely undergo complete systemic collapse as the financial system inevitably implodes.

Wed, 08/22/2012 - 15:54 | 2728533 Cognitive Dissonance
Cognitive Dissonance's picture

Seems like everything is going to plan bro.

Nice to see your mangy butt around here ZerOhead. :>)

Wed, 08/22/2012 - 16:18 | 2728588 ZerOhead
ZerOhead's picture

Thanks CD... it's nice to be liked by someone or something other than my security detail of deer flies and mosquitoes back at BugHaven who only think of me as a "Meals on Wheels" program...

The swimming, fresh air and excercise has been excellent however :)

Wed, 08/22/2012 - 16:37 | 2728657 Alea Iactaest
Alea Iactaest's picture

I had to log in just to give this comment a greenie. My keyboard is less amused.

Wed, 08/22/2012 - 16:00 | 2728552 MachoMan
MachoMan's picture

Some of us are lucky enough to have access to those voices...  and for some of us, we do not need to repeat mistakes of the past ourselves in order to learn a lesson.  Too bad they could not have been a bit more...  constraining on the baby boomers.

If you're not lucky enough to have those voices close by, then go hit up your local nursing home...  old people love to have something to talk about other than going to the doctor...  it might smell a bit funny, but some laundry and a shower is a small price to pay for first hand accounts...  also helps to see perseverance in the eyes of the orator to get a better sense of what to expect.

Wed, 08/22/2012 - 15:20 | 2728390 Dr. Richard Head
Dr. Richard Head's picture

You cannot do anything.  To try and shake them from their coma is futile.  The only smelling salts that can be applied are jack booted thugs when the collapse makes itself known.  Until then, stack and smile.

I have tried to explain nominal versus real gains to those types and they usually make the face of a dog hearing a dog whistle.

Wed, 08/22/2012 - 15:29 | 2728446 Cognitive Dissonance
Cognitive Dissonance's picture

Personally I prefer the (PM) dinner bell.

Then again I've had Tinnitus for years so what the hell do I know?  :)

http://en.wikipedia.org/wiki/Tinnitus

Wed, 08/22/2012 - 15:33 | 2728452 Al Gorerhythm
Al Gorerhythm's picture

Ms C;

Is there something the matter with us that we are so persistant with our views? I'm like a broken record and have been painted as a evangilist. It's not like I'm trying to talk them into joining Scientology or come walking on coals. "What am I missing from that tool box?" is a question that haunts me.

Wed, 08/22/2012 - 15:49 | 2728499 Cognitive Dissonance
Cognitive Dissonance's picture

It is very lonely outside the herd and we are clearly outliers so we tend to seek personal confirmation of our "right" mindedness in some way, shape or form. To take such a drastically contrary view is extremely risky emotionally and socially. And (potentially) physically as well.

History shows that when a country goes Tyrannical the non conformists are beaten into the ground....often first by their own friends, family and neighbors followed by an early morning visit by the men in black. We are taking great risk by speaking out so we reach out to others for the safety of numbers. We are trying to create our own protective pod by enlisting recruits to our way of thinking.

Plus.....there is a deep seated hope that if we could just wake some people up all the coming pain might be reduced..........or maybe even avoided.

Wed, 08/22/2012 - 15:51 | 2728521 Dagny Taggart
Dagny Taggart's picture

We are trying to create our own protective pod by enlisting recruits to our way of thinking.

I KNEW you were up to something! LOL

Wed, 08/22/2012 - 16:40 | 2728666 Alea Iactaest
Alea Iactaest's picture

CD -- sounds comforting but futile. I can hear myself crying out (and butchering old Bill), "Alas poor CD, I hardly knew him."

Wed, 08/22/2012 - 16:00 | 2728549 Al Gorerhythm
Al Gorerhythm's picture

Is there a collective "Panic Room" then?

Wed, 08/22/2012 - 15:41 | 2728461 ZerOhead
ZerOhead's picture

It keeps looking, smelling, tasting, and feeling like an endgame for so long now.

If it looks like a duck, walks like a duck, floats like a duck, quacks like a duck, and smells and tastes like a duck then it is extremely unlikely that it is not a duck.

It would only be wise to prepare accordingly.

Wed, 08/22/2012 - 16:29 | 2728625 Miss Expectations
Miss Expectations's picture

MsCreant,

Your colleague reminds me of a friend of mine.  I live in a hurricane prone area and last year I mentioned that it might be a good idea to start their generator to make sure it's working.  (Ethanol is hell on small engines.)  She said that they don't have a generator.  What?  What about all the food in the fridge and freezer that would go bad?  She said that during hurricane season she keeps next to nothing in the fridge and freezer so there won't be a big loss. 

Really, what can you do?

Wed, 08/22/2012 - 15:50 | 2728518 Hype Alert
Hype Alert's picture

If the Fed doesn't deliver at Jackson Hole, there may be a rude awakening.  With QE3 priced in a time or two already, there might be a slight pullback.

Wed, 08/22/2012 - 16:02 | 2728562 viahj
viahj's picture

ahh, but it's only after a significant pullback, will the printers be turned on.  you can't front run QE by buying.  short the muthafecker then plunge back in once Ben gives the nod as was the case when Obama told the nation that it's a good time to buy stocks prior to one of the instances of QE.

Wed, 08/22/2012 - 16:53 | 2728699 Alea Iactaest
Alea Iactaest's picture

All of this looks orchestrated to get some money off the sidelines prior to Jackson Hole.

* PMs rallying. Check.

* Treasury yields down. Check.

* Weaker USD. Check.

* Fed comments that inflation is in check. Check.

* Washington ignoring housekeeping issues like the debt ceiling and coming tax increases. Check.

* Shorts in place after endless summer melt-up crushes most retail shorts. Check.

* Volatility still at multi-year lows. Check.

* Greek debt deadline (8/20) in rear view mirror. Check.

Like lambs to slaughter...

Wed, 08/22/2012 - 14:56 | 2728302 Al Gorerhythm
Al Gorerhythm's picture

Someone is asleep at the wheel. It looks as if Bill Murphy's call of deep-pocket buyers are in da room and are playing by the cartel's game book and are running the guns after hours, just like they did. 

Fuck you in hell, Jamie Dimon and all whom you represent.

Wed, 08/22/2012 - 14:57 | 2728312 ParkAveFlasher
ParkAveFlasher's picture

Pimco's got some deep pockets.  Crater Lake-deep

Wed, 08/22/2012 - 14:54 | 2728305 SourNStout
SourNStout's picture

Gold Spike Coming!

 

Wed, 08/22/2012 - 14:54 | 2728307 madcows
madcows's picture

In order to up the gold percentage, they must have lowered some other commodity's percentage.  i'd like to know which one.  Gold is a hedge against inflation and deflation.  But, it can also be influenced by the economy.  Values go up with a strong economy due to industrial demand.

The decreased commodity holding would give an indication of whether they were increasing gold as a hedge against monetary pressures or as an investment in a strengthening economy.

Wed, 08/22/2012 - 14:57 | 2728314 Cognitive Dissonance
Cognitive Dissonance's picture

".......gold has decided to finally break out above its 200 DMA, and is now headed higher as the coy foreplay of the past 6 months has finally ended."

That was not coy foreplay Tyler, but rather some brutal S&M.

<thank God I didn't say the "safe" word and get out>

Wed, 08/22/2012 - 15:15 | 2728396 Dr. Richard Head
Dr. Richard Head's picture

Is that the book all the ladies are reading out there?  50 Shades of Gold?

Wed, 08/22/2012 - 17:25 | 2728766 Temporalist
Temporalist's picture

Better than "Quadrillion Shades of Fiat"

Wed, 08/22/2012 - 14:58 | 2728317 youngman
youngman's picture

Well with Junkers comments today...I almost sold all my gold....but then I came to my senses...I will wait for Merkle to speak...or maybe Draghi...to tell me everthing is AOK in the EURO zone......lol....

I am buying as fast as I can.....this crap gets deeper every day......I do think I will die of paper cuts though...when you are wheelbarrowing around 10 trillion and a wind comes up.....well its a bad way to die

Wed, 08/22/2012 - 15:00 | 2728330 Cranios
Cranios's picture

http://youtu.be/bBgQIy3clBg

You didn't build that mutual fund!

Wed, 08/22/2012 - 15:01 | 2728331 _ConanTheLibert...
_ConanTheLibertarian_'s picture

When they increase it to 50% (first thing I did) then I'm impressed but not now...

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