- February 19, 2013
- When It Comes to Gold, Stick to the Facts
Gold dipped below $1,600 last week, falling to a six-month low, much to the chagrin of gold investors. I find the timing of the correction peculiar, given the G20 Finance Ministers Meeting taking place over the weekend. There’s been a growing debate over Japan’s move to devalue its currency to stimulate growth, with reaction from the G-7 leaders stating that “domestic economic policies must not be used to target currencies,” reports Reuters.
While the G-7 tried to legitimize the currency debasement with this statement, in reality, investors seem to be able to see through to the real motivations.
The main reason the mainstream media gave for the correction in the yellow metal is hedge funds’ selling of gold late last year. According to quarterly filings, Hedge Fund Manager George Soros sold half of his holdings in the SPDR Gold Trust ETF (GLD) in the fourth quarter of 2012. Bloomberg attributed the sell as a move that may “bolster speculation that gold’s 12-year bull-run is coming to the end.” However, Soros may have liquidated his gold holdings because he identified a significant short-term opportunity in the currency markets.
I have said many times that government policies are precursors to change, and late last year, Japan’s new leader, Prime Minister Shinzō Abe, openly indicated his intention to drive down the currency to make the economy more competitive and increase inflation. As a result of Japan’s policy changes, the yen weakened, driving up the price of gold in Japan’s local currency.
In other words, a gold investor in Japan was likely ecstatic with his gold trade over the past few months.
Take a look at the comparison of gold’s return in different currencies. The chart below compares the percentage change of gold in the Japanese yen to the metal’s percentage change in U.S. dollar terms over the last six months. From the middle of August 2012 until about November, gold prices in both currencies closely followed each other.
However, as a result of changes in government policies, over the six-month period, gold rose nearly 19 percent in yen, while only increasing less than one percent in U.S. dollar terms.
George Soros seemed to anticipate the effect that Japan’s government policies would likely have on the velocity of money. This turned out to be a brilliant move, as “wagering against the yen has emerged as the hottest trade on Wall Street over the past three months,” says the Wall Street Journal. The newspaper reported that Soros gained “almost $1 billion on the trade since November,” during a time the yen declined nearly 20 percent in four months.
I admire Soros for his ability to identify significant effects that government policies have on markets as easily as recognizing when ice turns to water. More importantly, he quickly acts on these emerging events.
This isn’t his first big win in foreign markets. In 1992, based on British government policy changes, Soros shorted British pounds and bought German marks, earning $1.8 billion for his fund.
Just like recognizing how new equilibriums can alter the dynamics of an environment, government policies can significantly change the velocity of money. Global investors watch for these trends to know where to invest in commodities and markets, find new opportunities and adjust for risk.
I discussed the potential motivation behind Soros’ trade with CNBC’s Simon Hobbs on Friday. I explained how gold’s correction was reaching an extreme, indicating a potential buying opportunity. You can see on our oscillator model how gold has dropped nearly 2 standard deviations on a year-over-year basis. An event like this has happened only about 2 percent of the time over the last 10 years. Following these extreme lows, gold has historically increased as much as 15 percent over the next year.
Back in June 2012, I told CNBC the same thing: Gold had reached an extreme low, and only a few months later, the metal climbed nearly 10 percent.
During short-term gold corrections, it’s much more important to focus on the facts, including the fact that gold is increasingly viewed as a currency. Rather than buying real estate, lumber or diamonds, central banks around the world are buying gold. According to the World Gold Council (WGC), over 2012, central bank demand totaled 534 tons, a level we have not seen in nearly 50 years.
Emerging market central banks have been adding gold to their reserves, including Mexico, Brazil, the Philippines, South Korea and Russia. Over the past decade, Russia has accumulated a total of 958 tons of gold, making its gold reserves the eighth largest of all central banks, says the WGC.
Another fact about gold is the persistence of the Love Trade. As you can see below, jewelry demand declined slightly, about 3 percent in 2012, and more than half of this demand came from India and China, the countries with a cultural affinity toward gold. India’s gold purchases declined 12 percent due to an import tax and a weak rupee. However, even though the gold price experienced a significant increase in local currency, India’s demand is “all the more remarkable and serves to emphasise the importance of gold to Indian consumers,” says the WGC.
Notably, India had a better-than-expected fourth quarter, and retained its rank as the largest gold market in the world.
In China, there was a slowdown in GDP in the first half of the year, which weighed on gold purchases. For the year, the WGC indicated that there was only a slight increase in demand over the previous year.
In 2013, the WGC expects both markets to remain strong, forecasting growth rates of about 10 to 15 percent. I believe as GDPs in Chindia rise, so will their gold demand. And as long as the precious metal is attractive to both the fear trade and the love trade, hold tight to gold, with a 5 to 10 percent weighting in gold and gold stocks, and rebalancing annually.
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. Standard deviation is a measure of the dispersion of a set of data from its mean. The more spread apart the data, the higher the deviation. Standard deviation is also known as historical volatility. The following security mentioned was held by one or more of U.S. Global Investors Funds as of 12/31/12: SPDR Gold Trust ETF.
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- January 22, 2013
- 4 Sensational Facts About Gold Investing That You Might Not Know
Our ever-popular Periodic Table of Commodity Returns has been updated through 2012. Investor Alert readers love this chart as it shows a decade of results across 14 different commodities, providing strikingly rich information in a very familiar format.Last year, 11 commodities rose in value, with wheat rising as the top crop after seeing a significant decline in 2011. It was a similar rags-to-riches story for the next few leaders, including lead, zinc, natural gas and platinum, which all climbed double digits in 2012 after falling in 2011.
Only three commodities declined over the year: Crude oil fell by 7 percent after rising 8 percent the previous year. Nickel declined for the second year in a row. In 2012, the metal lost 9 percent and in 2011, nickel fell another 24 percent.
Coal was the worst-performing commodity in 2012, falling nearly 17 percent. Coal’s been going through a rough spell lately; in fact, the commodity has not been king for five years (although it did record a 31 percent increase in 2010). As Global Resources Fund Portfolio Manager Evan Smith explained to listeners during our recent presentation, for the first time ever in the U.S., natural gas provided more electricity and power than coal did.
As you can see from the table, commodities often have wide price fluctuations from year to year given the many factors affecting supply and demand, such as government policies, union strikes, and currency volatility. That’s why when it comes to commodities and commodity producers, many investors “leave the driving” to active money managers who understand these specialized assets and the global trends affecting them.
Take gold and gold companies, for example. After investing in the mining industry for decades, we’ve taken note of several facts about gold that continue to surprise our investors. Here are four of the latest:
1. Gold Has Been A Consistent Performer Over The Decade
While the precious metal did not shoot the lights out in 2012, gold’s bull rally goes on. It ended the year up 7 percent, making it a phenomenal 12th year in a row that gold rose in value. In a special gold bar version of the Periodic Table below, you can easily see gold’s rotation among the commodities from year to year.What’s fascinating is the three-year rising pattern relative to other commodities that emerges when you focus on the bars. Over the past 10 years, gold has risen in position compared with the others for three years in a row, then fallen in relative position in the fourth year before repeating the cycle. Will it follow the same pattern and be in the top half of the Periodic Table in 2013?
2. Gold Should Remain A Hot Commodity In 2013
Considering the global easing cycle and the continuous running of monetary printing presses, I believe the Fear Trade will continue to be a driver of gold over the next several months. Take a look at the projected rise in the balance sheets as a percent of GDP from the European Central Bank, the Bank of Japan, the Federal Reserve and the Bank of England over 2013. The ECB is estimated to have a balance sheet that is nearly 50 percent of its GDP by the end of the year. The Bank of Japan is right behind the ECB, with its balance sheet projected to be nearly 35 percent of GDP. As Mike Shedlock of Mish’s Global Economic Trend Analysis said, “The race is on to see which central bank can load up its balance sheet with the most garbage the fastest.”
My friend Ian McAvity also summed it up well in his Deliberations on World Markets: “Gauging from the panicky actions of the major central banks, I would still prefer to own gold than their paper.” With the monetary printing presses warm and real interest rates in the red, gold will likely glimmer for another year.
3. Gold Is The Least Volatile Commodity On The Table
Given the fact that every gold move is analyzed and dissected by the media, it may surprise you that this precious metal was actually the least volatile of the 14 commodities. Its rolling 12-month standard deviation (sigma) over the past 10 years has been 14 percent, compared to the most volatile commodity, (nickel), which has a rolling 12-month sigma of nearly 60 percent.Here’s another way to look at the surprisingly low volatility of gold. Take a look at the frequency of 10 percent moves up or down over any 20 trading days. The metal is only slightly more volatile than the S&P 500. Gold companies, crude oil and the MSCI Emerging Markets Index have all experienced more up and down moves than gold.
Measuring Monthly Volatility as of 12/31/12
Calculated over rolling 20-trading day periods in past 10 yearsNumber of
+10% MovesNumber of
-10% MovesFrequency of
±10% MovesNYSE Arca Gold BUGS Index (HUI) 490 296 30% WTI Crude Oil 434 302 29% MSCI Emerging Markets (MXEF) 139 169 11% Gold Bullion 130 60 7% S&P 500 Index (SPX) 33 72 4% Whereas card counting at a Blackjack table can get you booted from casinos and barred for life, as an investor, you are allowed to take full advantage of counting the 10 percent moves.
Over 2013, you can count on gold moving in either direction, so even if the metal experiences extreme volatility to the downside, regardless of what the headlines report, Investor Alert readers know that any dip in price offers potential buying opportunities. Keep in mind though, that it’s prudent to invest only 5 to 10 percent of your total portfolio in gold and gold stocks.4. The Last 4 Years Were Better Than You Thought
Recently, I showed how the S&P 500 Index and gold bullion significantly outperformed the iShares Core Total US Bond ETF. Many investors asked about gold stock performance. As you can see below, the NYSE Arca Gold BUGS Index (HUI) experienced quite a gain, increasing more than 50 percent on a cumulative basis since the beginning of 2009. Both considerably outperformed the bond investment.
What’s sensational news to precious metals investors sometimes doesn’t make the cut as breaking news. We emailed a message to our readers on Friday, asking you to tune in to CNBC to see me talk about silver. I’m pleased to hear that there were many of you who tried to tune in (Thank you!), but I’m sorry to say the reporters preempted my investing insights for what was viewed as a more sensational story about millionaire and fugitive John McAfee.
In the meantime, I’ll continue sharing these fascinating facts about gold, silver and other commodities with investors at Cambridge House’s Resource Investment Conference in Vancouver and the World Money Show in Orlando, Florida. Hope to see you there!
Please consider carefully a fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.
Past performance does not guarantee future results.Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. Because the Global Resources Fund concentrates its investments in a specific industry, the fund may be subject to greater risks and fluctuations than a portfolio representing a broader range of industries.
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.
The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. The NYSE Arca Gold BUGS (Basket of Unhedged Gold Stocks) Index (HUI) is a modified equal dollar weighted index of companies involved in gold mining. The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. Standard deviation is a measure of the dispersion of a set of data from its mean. The more spread apart the data, the higher the deviation. Standard deviation is also known as historical volatility.
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- January 15, 2013
- The Move Costing Investors Big-Time
An interesting study published in Science recently found that people frequently underestimate their future selves. When asked to score their current preferences, values and personality traits compared with how they felt 10 years ago and how they will feel 10 years in the future, people believe they changed more in the past than they will in the future.It didn’t matter whether the participants were teenagers or middle-aged; people just assume that their present selves are “as good as it gets.”
Investors have held a similar illusion about the stock market since the financial crisis. With the barrage of negative headlines and abhorrence toward risk, investors seemed to feel that equities would not improve going forward.
This turned out to be a mistaken belief: Take a look at the last four years of U.S. market and gold returns. Since the beginning of 2009 through the end of 2012, gold had a cumulative total return of nearly 90 percent. The S&P 500 Index also had a dramatic climb, with a cumulative return of more than 70 percent. In comparison, the iShares Core Total US Bond ETF increased only 22 percent on a cumulative basis over the same time frame.
As I explained in our Outlook Webcast, stock and gold investors should thank President Barack Obama and Federal Reserve Chairman Ben Bernanke for these phenomenal results, as the Fed has been on a massive bond-buying frenzy during its three rounds of quantitative easing and Operation Twist. This spree has pushed the central bank’s balance sheet to nearly $3 trillion, reports the USA Today. The newspaper says this is “more than three times the size of the Fed’s holdings before the financial crisis” in the fall of 2008.
All this excess money in the system, compliments of Helicopter Ben, has helped the S&P to rise over the past U.S. presidential cycle. As you can see, Obama’s presidential cycle beat the average of all other presidential cycles going back to 1929.
The bad news is that many investors have not been participating, as they have acted on the belief that negative short-term headlines equate to dismal long-term equity performance. We’ve frequently discussed how billions of dollars have been yanked out of the perceived “risky” equity funds into purportedly safe havens, such as Treasuries and bond funds. The chart below shows the continuation of this extreme behavior since 2006, which is the move costing these investors big-time.
In the media’s duty to report risks facing the average investor, some reporters seemed to have overlooked what I believe to be the greatest threat. As Bloomberg only recently quantified, “Americans have missed out on almost $200 billion of stock gains as they drained money from the market in the past four years.”
To be fair, year-end reporting has brought to light the considerable equity gains. Bloomberg Businessweek explained how “Five Brutal Years Teach Investors to Sit Tight,” highlighting several investment gurus, including Vanguard’s Founder Jack Bogle and Josh Brown of The Reformed Broker blog, who wrote about the wisdom of those investors who held tight to stocks.
Just recently we received an olive branch indicating that the bond fund flows may be receding and reverting back to equity funds. CNBC reports that during the week ended January 9, $22 billion flowed into long-term equity mutual funds and exchange-traded funds, according to data from Bank of America Merrill Lynch. This amount “was the second-highest amount on record,” writes CNBC.
One week of data, though, does not make a trend. Research shows that retail investors may continue selling their U.S. equities through 2013. According to Goldman Sachs, an estimated $475 billion is expected to leave stocks. On the bright side, the “smart money”—corporations who are engaging in mergers & acquisitions activity as well as buying back shares of stock—are expected to purchase $450 billion, says Goldman Sachs. In addition, institutional investors, including mutual fund companies, foreign investors, ETFs, life insurance companies and pension funds, are expected to put an additional $225 billion into the U.S. equity market in 2013.
Another Olive Branch for 2013?
Over the past year, gold stock investors have been fleeing the sector after seeing declining returns throughout the year. As of December 31, 2012, the FTSE Gold Mines Index declined nearly 14 percent over 2012. We’ve seen this pattern before, as gold stocks have historically performed poorly during a U.S. presidential election year. This is data going back nearly 30 years. See how U.S. Global’s gold fund fared.
However, the math suggests gold stocks may stage a significant comeback during 2013. Historically, during post federal election years, the Philadelphia Stock Exchange Gold and Silver Index has seen significant gains.
It’s not only the seasonal aspect that drives our bullish opinion toward gold stocks. If you have not downloaded it yet, I encourage you to read our Special Gold Report that discusses the significant improvements that gold companies have made over the past year.
Investors’ misconception about future stock returns underscores why I frequently point out cyclical patterns and seasonal cues. I believe these trends help investors anticipate the performance of global markets and commodities before participating.
As Winston Churchill once said, “A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.” For the new year, I challenge all readers to fight off the negativity, see long-term opportunity in global equity markets and, most importantly, remain invested. Your future self may thank you.
If you didn’t get a chance to listen in to our webcast on commodities and global markets, you can now listen at your convenience. The replay includes the presentation that has, as of January 14, received nearly 110,000 page views on Business Insider.
By clicking the link above, you will be directed to a third-party website. U.S. Global Investors does not endorse all information supplied by this website and is not responsible for its content.
The Philadelphia Stock Exchange Gold and Silver Index (XAU) is a capitalization-weighted index that includes the leading companies involved in the mining of gold and silver. The FTSE Gold Mines Index Series encompasses all gold mining companies that have a sustainable and attributable gold production of at least 300,000 ounces a year, and that derive 75% or more of their revenue from mined gold. The S&P 500 Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies.
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- January 2, 2013
- Readers’ Golden Nuggets Focused on Gold, Resources and Overcoming Negativity
Last week I counted down the most popular commentaries over the past year. China, commodities and bond fund popularity were big hits; so were the Surprises in Gasoline, Oil and Resources Stock Prices. Here are the top four of 2012.
4. Sell in May and Go Away? Not this Year
Sometimes it’s the headline that attracts readers, and this is definitely one that gained a great deal of attention. More than 7,000 Seeking Alpha readers checked out the commentary and many left some pretty energized comments—some agreeing with me, and others with a differing view.
I took on the old adage and argued that there were plenty of reasons for investors not to let their equity positions take a long summer vacation. So how did the S&P 500 Index perform? As shown in the chart below, stocks fell significantly in May, but then went on to have a fantastic summer, with June, July, August and September all remaining in positive territory.
One of the reasons I gave for sticking with stocks is the fact that it was the year of an election, which has historically produced positive returns. Since 1972, the stock market has rallied five of the eight election years, according to J.P. Morgan, with market gains of 12 to 26 percent. Only during recession years did the S&P 500 decline.
Not only did the summer of ’12 buck the trend, but take a look at the latest presidential election cycle. The performance of the S&P over the last four years under Obama has been one of the best over the past 50 years of any president, defying the odds of what many people thought about the market.
3. Love Trade Cools As Central Banks’ Gold Demand Heats Up
The third-most popular commentary generated a lot of attention because of the relatively new trend that I’ve highlighted a few times in 2012: Emerging markets’ central banks are diversifying away from the U.S. dollar and buying gold.
This trend could be potentially significant in the coming years. Last October, I highlighted Franco-Nevada’s Pierre Lassonde chart showing the potential increase in gold holdings. Based on the European Central Bank’s recommendation to hold 15 percent of reserves in gold, developing countries would have to accumulate 17,000 tons of gold. At a purchase of 1,000 tons a year (or about 40 percent of today’s production), these central banks would have to buy gold for the next 17 years!
Back in May, I spoke at the Hard Assets Investment Conference in New York. Business Insider posted my slides calling them the “ULTIMATE Bullish Presentation on Gold” and since then the presentation has received 233,141 views on their site, making it our most popular presentation of the year. In case you missed it, you can view all 88 slides.
2. Where’s the Beef for Gold Equities?
Our second-biggest story was also gold related, but this year, gold miners were top of mind for investors as gold stocks have remained undervalued compared to bullion. When I discussed the disconnect back in April I pointed out the spread between the NYSE Arca Gold Miners Index and gold bullion was at the same extreme level it was during the 2008 credit crisis despite an improving global economic outlook.
Bloomberg’s “Chart of the Day” recently displayed the same ratio of gold miners vs. gold, going back to September 1993 when the industry gauge was created. As you can see in the chart below, yesterday’s ratio of 0.75 hasn’t moved much from the year’s low of 0.70 on May 15. We see this as a buying opportunity for quality companies as shares of gold miners are a relative bargain to the metal.
One of our most popular publications of the year was the Special Gold Report: What’s Driving Gold Companies? I looked at the multiple forces squeezing the profits and earnings out of gold miners and highlighted the importance of selectively choosing companies that exhibit the best relative growth and momentum characteristics.
1. How to Look Past Negativity to See Opportunity
“Things are not always what they seem; the first appearance deceives many; the intelligence of a few perceives what has been carefully hidden.” These wise words from Plato reflect the theme of our readers’ favorite posting of 2012. Things are not always as they appear, especially in the media. At a natural resources conference I attended last summer, GMO’s Jerry Grantham made a compelling case for investment in resources but the CNN article on his speech was titled “Our planet will truly be toast.” When I was interviewed on CNBC a host who had hyped the initial public offerings of Facebook and Groupon to viewers scoffed at investing in gold. Since their IPOs, those two high tech companies had collectively lost more in value than all the money invested in gold funds.
Many investors have been unable to recapture their lost confidence. Americans have missed out on almost $200 billion of stock gains as they pulled money from the markets in the past four years since the financial crisis, according to a story by Bloomberg. I believe this post proved popular because we could all use some good news and positive solutions. I reminded investors to look past the negativity to see the patterns and anomalies that will determine where opportunities and threats lie.
Though our political leaders have not been instilling much confidence in their dealings with the fiscal cliff and recent tragic events have broken our hearts and weigh on our minds, I believe that 2013 will bring renewed hope, optimism and opportunity.
The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. The NYSE Arca Gold Miners Index is a modified market capitalization weighted index comprised of publicly traded companies involved primarily in the mining for gold and silver.
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- December 24, 2012
- Light at the End of the Tunnel for Gold
Intuition was telling me something was going on these past few days in the gold market. Our investment team was watching gold and gold stocks take a tumble for no obvious reason. It wasn’t only us who felt this way: many analysts were caught off-guard. One comment from Barclays Research indicated that the week was unusually “brutal … with quite a few confused participants with some seemingly positive aspects of the market not having an impact.”
My hunch was realized only days later when Zero Hedge posted that Morgan Stanley Wealth Management recommended that its clients dump two of John Paulson’s funds. As MS clients redeemed their shares, the hedge fund giant became a forced seller of gold and gold stocks.
What complicates the gold market is the fact that Paulson is such a big fan of the yellow metal that he offers a “gold share class” to investors, meaning shares are denominated in physical gold. The drawback is when an investor redeems shares, his firm has to convert from gold back to dollars, which forces him to sell his hedged position in the SPDR Gold Shares ETF (GLD). The unfortunate consequence of his actions is a short-term decline in the gold price as the market adjusts.
The chart below highlights how gold, the S&P 500 Index and the 10-Year Treasury yield were plodding along together, until December 12, when the metal dramatically dropped off. This is possibly the day “Paulson may have gotten the redemption fax,” says Zero Hedge.
Paulson is only one high-profile example of a stream of hedge fund managers who have suffered liquidations this year. Much to our chagrin, gold and the gold mining industry have been on the wrong side of these trades.
The metal also took a hit recently when a large investor, or a group of investors, made a negative bet on gold futures, with a speculative put position from January to February nearly doubling in size. Credit Suisse suggests it may be the action of a hedge fund.
Paulson’s loss can be your gain. At U.S. Global Investors, we study probability and statistical models to help us improve our odds in the market. It’s like counting cards in Vegas—there’s no guarantee you’ll hit the jackpot, but you usually improve your odds if you understand the math of probabilities and place your bets accordingly.
One of our favorite charts is the oscillator which shows the probability of gold returning to its mean after a dramatic rise or fall. We believe it helps investors put the current correction in context with historical moves and determines potential buying and selling opportunities.
Based on the last 10 years of data, gold seems to be approaching an oversold position after this latest correction. In standard deviation terms, the percentage change in year-over-year rolling returns, gold has made a downward move of 1.2 standard deviations. An event like this only happens about 10 percent of the time, with high odds favoring a reversion to the mean.
Life is about managing expectations. With gold and gold stocks, there will be short-term anomalies, such as hedge funds’ liquidation. Another historical difference for gold stocks relates to the presidential election year cycle. As we have mentioned before, gold miners tend to perform poorly in the year of a U.S. presidential election. Regardless of which party is in the White House and which party wants to take it back, going back to 1984, the Philadelphia Stock Exchange Gold and Silver Index (XAU) has declined an average of 18.4 percent in the year Americans are busy thinking about voting for a leader.
It’s not the end of the world for gold and gold stocks. Take a look at what happens the year following a U.S. presidential election: Going back to 1985, the XAU historically has increased substantially in post-election federal years, rising 23.4 percent, on average.
With governments lacking courage for fiscal discipline, I expect that interest rates will remain in negative territory for a long time. Central bankers will continue to keep the printing presses warm as policies aren’t expected to change. I believe this will keep the Fear Trade buying gold throughout 2013.
In addition, emerging market central banks have been diversifying into gold. Net official sector purchases of 425 tons year-to-date is a drastic difference compared to only a few years ago when central banks were net sellers of the precious metal. Only recently, UBS reported that in November, Russia purchased nearly 3 tons of gold and Brazil bought almost 15 tons. Iraq—a notable new buyer—bought 25 tons from August through October. Given that this is the country’s first increase since the early 2000s, “having a new buyer in the central bank space and especially from a new region is an important development,” says UBS.
While the Love Trade has been subdued this year, we see light at the end of the tunnel, not a train. One recent development is the increase in mutual fund flows of $32 billion into emerging markets since the announcement of the third round of quantitative easing (QE) in the U.S. This appears to be a powerful precursor for a stronger 2013, which would reignite the Love Trade in China and India.
As we head into the final days of the year, I’d like to take this opportunity to thank our faithful readers for following, reading and sharing our thoughts on the markets. We appreciate your confidence and trust and look forward to a prosperous new year.
Here’s wishing you and your loved ones a very safe and joyful holiday season!
U.S. Global Investors, Inc. is an investment management firm specializing in gold, natural resources, emerging markets and global infrastructure opportunities around the world. The company, headquartered in San Antonio, Texas, manages 13 no-load mutual funds in the U.S. Global Investors fund family, as well as funds for international clients.
Sign up today for our 2013 Outlook webcast at 3 p.m. CT on January 9, 2013. For more on global investing from Frank and the rest of the U.S. Global Investors team, subscribe to the Frank Talk blog, follow us on Twitter at www.twitter.com/USFunds or like us on Facebook at www.facebook.com/USFunds.
The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. The Philadelphia Stock Exchange Gold and Silver Index is a capitalization-weighted index that includes the leading companies involved in the mining of gold and silver. Standard deviation is a measure of the dispersion of a set of data from its mean. The more spread apart the data, the higher the deviation. Standard deviation is also known as historical volatility.
By clicking the link above, you will be directed to a third-party website. U.S. Global Investors does not endorse all information supplied by this website and is not responsible for its content.
The following security mentioned was held by one or more of U.S. Global Investors Funds as of 9/30/12: SPDR Gold Shares
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