Post by unlawflcombatnt on Oct 23, 2010 11:34:48 GMT -6
Lack of confidence in currencies and the world economy is increasing gold purchases, especially among the rich. Though inflation by itself has undoubtedly increased the price of gold somewhat, speculative demand has also contributed at least as much to gold's current price, and probably a lot more.
Since the year 2000's lows of around $260/oz, gold's price has increased over 400%--currently at ~$1330/oz. Even if inflation had been 2x as much as the 27% claimed by the Dept of Labor, that would still make it only 54%. Even if inflation had been 100% over the last 10 years, it would only account for 1/4 of the increase in gold price.
What makes more sense (to me, at least), is that with the radical upward redistribution of wealth--especially over the last 3 years--there has been still more money available for speculation. Since this has been accompanied by shrinking opportunities for productive investment, more money has gone into non-productive investment such as gold. In addition, the declining value of homes and commercial real estate has made them much less attractive investments. Thus, investment of increasingly over-abundant investment capital has shifted into gold and other precious metals.
from Reuters:
Super-rich investors buy gold by ton
Mon, Oct 4 2010
By Laura MacInnis
"The world's wealthiest people have responded to economic worries by buying gold by the bar -- and sometimes by the ton -- and by moving assets out of the financial system, bankers catering to the very rich said on Monday.
Fears of a double-dip downturn have boosted the appetite for physical bullion as well as for mining company shares and exchange-traded funds, UBS executive Josef Stadler (said)....
"They don't only buy ETFs or futures; they buy physical gold," said Stadler, who runs the Swiss bank's services for clients with assets of at least $50 million to invest.
UBS is recommending top-tier clients hold 7-10% of their assets in precious metals like gold, which is on course for its 10th consecutive yearly gain....
Julius Baer's chief investment officer for Asia is also recommending that wealthy investors park some of their assets in gold as a defensive stance following a string of lackluster U.S. data and amid concerns about currency weakness.
"I see gold as an insurance," Van Anantha-Nageswaran said. "I recommend 10% as minimum in portfolios...
ULTIMATE BUBBLE?
Billionaire financier George Soros, echoing comments from investment guru Warren Buffett, last month described gold as the "ultimate bubble" because it is costly to dig up and has no real value except its market price.
But a rising price for the precious metal has in itself generated more and more demand from investors looking for a way to hedge against a fresh recession....
The uneasy outlook for inflation, hard currencies and global growth has triggered a 5-fold increase in a physical gold fund launched by Pictet one year ago, the Swiss private bank said.
UBS's Stadler said the precious metal has become a staple of investors' portfolios, despite questions about whether it makes for a smart long-term investment.
"If you talk to ultra-high net worth individuals, that level of uncertainty has never been higher in the last 2, 3, 4 years," he said. "If they ask me, 'Is inflation going up or are we entering a deflationary cycle?,' I don't know. But obviously nobody knows."
Anthony DeChellis, managing director of Credit Suisse's Americas private banking unit, said...that clients are more interested in capitalizing on the rise in gold prices than using the precious metal as a safe-harbor investment.
"They're asking, 'If it's a bubble, how far can I ride that bubble,'" he said. "I cannot say we've seen a spike in gold interest, but there's an interest in the phenomenon of it."....
And not all bankers are recommending exposure to gold.
Andreas Wolfer, head of private banking at UniCredit Group, attributed the run-up in the price of gold to frayed investor nerves after the 2008 financial crisis as well as concerns about sovereign debt in the euro zone."
Since the year 2000's lows of around $260/oz, gold's price has increased over 400%--currently at ~$1330/oz. Even if inflation had been 2x as much as the 27% claimed by the Dept of Labor, that would still make it only 54%. Even if inflation had been 100% over the last 10 years, it would only account for 1/4 of the increase in gold price.
What makes more sense (to me, at least), is that with the radical upward redistribution of wealth--especially over the last 3 years--there has been still more money available for speculation. Since this has been accompanied by shrinking opportunities for productive investment, more money has gone into non-productive investment such as gold. In addition, the declining value of homes and commercial real estate has made them much less attractive investments. Thus, investment of increasingly over-abundant investment capital has shifted into gold and other precious metals.
from Reuters:
Super-rich investors buy gold by ton
Mon, Oct 4 2010
By Laura MacInnis
"The world's wealthiest people have responded to economic worries by buying gold by the bar -- and sometimes by the ton -- and by moving assets out of the financial system, bankers catering to the very rich said on Monday.
Fears of a double-dip downturn have boosted the appetite for physical bullion as well as for mining company shares and exchange-traded funds, UBS executive Josef Stadler (said)....
"They don't only buy ETFs or futures; they buy physical gold," said Stadler, who runs the Swiss bank's services for clients with assets of at least $50 million to invest.
UBS is recommending top-tier clients hold 7-10% of their assets in precious metals like gold, which is on course for its 10th consecutive yearly gain....
Julius Baer's chief investment officer for Asia is also recommending that wealthy investors park some of their assets in gold as a defensive stance following a string of lackluster U.S. data and amid concerns about currency weakness.
"I see gold as an insurance," Van Anantha-Nageswaran said. "I recommend 10% as minimum in portfolios...
ULTIMATE BUBBLE?
Billionaire financier George Soros, echoing comments from investment guru Warren Buffett, last month described gold as the "ultimate bubble" because it is costly to dig up and has no real value except its market price.
But a rising price for the precious metal has in itself generated more and more demand from investors looking for a way to hedge against a fresh recession....
The uneasy outlook for inflation, hard currencies and global growth has triggered a 5-fold increase in a physical gold fund launched by Pictet one year ago, the Swiss private bank said.
UBS's Stadler said the precious metal has become a staple of investors' portfolios, despite questions about whether it makes for a smart long-term investment.
"If you talk to ultra-high net worth individuals, that level of uncertainty has never been higher in the last 2, 3, 4 years," he said. "If they ask me, 'Is inflation going up or are we entering a deflationary cycle?,' I don't know. But obviously nobody knows."
Anthony DeChellis, managing director of Credit Suisse's Americas private banking unit, said...that clients are more interested in capitalizing on the rise in gold prices than using the precious metal as a safe-harbor investment.
"They're asking, 'If it's a bubble, how far can I ride that bubble,'" he said. "I cannot say we've seen a spike in gold interest, but there's an interest in the phenomenon of it."....
And not all bankers are recommending exposure to gold.
Andreas Wolfer, head of private banking at UniCredit Group, attributed the run-up in the price of gold to frayed investor nerves after the 2008 financial crisis as well as concerns about sovereign debt in the euro zone."