Gold: "Investors do not want to take profits"
July 9, 2010
lefigaro.fr / jdf.com After chained records to more than 1,260 dollars per ounce, gold has reached its lowest level since one month to less than $ 1,200. Is this a new trend or just a correction?
Anne Ruffin This movement is a technical correction, logical after the gold has established a succession of records. It is therefore welcome as a rapidly rising gold price would have reduced fears of bubble. The yellow metal is still up nearly 400 dollars in two years and a half and see the neighborhood of $ 1,200 is a sign of greater interest than expected in the area. In dollars, per ounce increased by nearly 10% since early 2010 and more than 27% a year.
Since the low point of gold in December 1998, gold has gained 20% on average per year. The increase in gold prices could now be done on a slower pace.Admittedly, last week the news on European debts are better, especially as regards the pace of the austerity plan of Greece allows to cover its debts. The euro is logically started rising and the dollar and gold down. The crisis has confirmed a new trend: the inverse relationship between the dollar and gold (which means that when one increases, the other down) is currently suspended.
Why gold it becomes a safe haven?
Fears about the European debt and return to solid growth are far from being resolved. We face a unique market environment. The signs are negative and macroeconomic volatility in currency markets has never been stronger. The currencies that are deemed most risky are not necessarily.The appreciation of the Chinese yuan could exacerbate capital flows to emerging markets. What is likely to encourage the accumulation of gold in the coming months.
In short, this series of records set in gold is clearly illustrating the fears displayed by investors on European debts. Show gold stay in the neighborhood of $ 1,200, while the euro is rising again is a sign that investors do not want to take profits on the gold market. They now have a vision of long-term flows and sellers have clearly given way to stream buyers, including the side of central banks. With this change, they clearly supported the gold market.
How do you explain this change of mindset of investors vis-à-vis the gold?
By adopting this vision of long-term, investors also want to protect themselves against the risks of inflation are nonexistent for the time my credit score. But once the economy is more robust, higher production costs, inflated by the inflation in commodity prices, will affect the selling price. We could logically go back to a regime of inflation greater than in the past decade.
What is special about your fund?
We assume that if investors want to buy physical gold, gold bars, for example, they do not need us.Through our equity funds, we bring our expertise in selecting companies listed as receiving deposits, taking into account the geographical and operational risks inherent in these societies. Note that the gold mining sector is very varied. Each pool generates different returns. Hence the importance of having a diversified portfolio.
Moreover, through investment in listed companies, not physical gold, the fund has the advantage of having a leverage effect listed securities rose faster than gold prices. For example, it is not uncommon for securities to rise 3% to 5% when the gold price rose by only 1%.In my funds, I have titles that have won 75% in 2009 while gold prices jumped 25%.
What companies have you selected in your portfolio?
I'm primarily invested in Canadian companies for the simple reason that most listed companies are located in Canada. The proportion of world gold from South Africa has halved in twelve years, and their production costs are rising sharply, due to ever greater depths of their deposits. As for China, its market is rather opaque. While the country is the largest producer of gold, but there are very few listed companies. The Chinese government encourages more recently, individuals to invest in gold. I do not own a Chinese gold mining firm, and the rest of my portfolio is shared between Australia, Africa, England and Peru.
What do you say to those who speak of risk bubble in gold?
Much of investment flows has focused recently on ETFs (stock index funds, Ed) and it is likely that these positions lasting. Rising gold prices has been gradual and we are far from a background of bubbles. Central banks have clearly shown their willingness to stop the flow of vendors in this market and keep their gold reserves. This helps to boost the value of the euro
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