Gold News

Gold Price "Continues to Yo-Yo" But Greater Asset Allocation "Likely" as Gold Tops Hedge-Fund Strategies

The Gold Price slipped but held above yesterday's two-week low in London dealing on Friday morning, giving back half of Asia's 1% rally against the Dollar as the US currency rose for the fourth day running on the forex market.

Global stock markets ticked lower, as did broad commodity prices.

The Euro fell again towards $1.325 – helping push the Gold Price in Euros back above €33,300 per kilo – despite a record-high reading of German business confidence and a new "crisis resolution" agreement between European Union leaders meeting in Brussels.

Not starting until 2013, however, the deal delivers "little concrete" and "nothing to advance the [current] near-term measures" according to analysts.

Ireland's debt was today cut 5 notches to near "junk" status by the Moody's ratings agency, putting it on a par with Russia and Lithunia notes Reuters.

"Sovereign bonds have lost some of their 'risk free' attributes over the last couple of years, and trust in fiat currencies has been eroded," writes HSBC Bank's head of asset allocation Fredrik Nerbrand in a new report.

"No wonder many investors are choosing to Buy Gold as a hedge against the risks of paper assets."

US Treasury bonds rallied on Friday, pushing 10-year yields back down to 3.38% from yesterday's new 7-month high at 3.56%. But fund managers in Europe have been cutting their exposure, according to a Bloomberg survey, reducing their US T-bond holdings by 1.4% in November.

Nerbrand's team at HSBC reckon that Gold Investment accounts for just 0.14% of the average global portfolio today.

"If this figure increases, as we expect, the Gold Price could rise significantly...We believe asset allocators are likely to
increase their weighting in gold over the next ten years if they focus on risk management"

Gold has delivered the "greatest success" of strategies applied by Paulson & Co., the world's third largest hedge fund,  reports the Financial Times meantime.

Betting on corporate events such as mergers & acquisitions has returned 14.3%, says the FT, while Paulson's Credit Opportunities Fund has risen by 16.5% in 2010.

The Paulson & Co. Gold Fund has risen by 35%. Dollar prices for plain Gold Bullion have gained 23.4%.

"Profit-taking on the recent rally saw gold lose considerable ground on Thursday...exacerbated by a strengthening Dollar," notes Walter de Wet, senior commodities analyst at Standard Bank, today.

"Yesterday’s dip in gold prompted some bargain hunting, led by the physical markets. Speculative action in the form of short-covering has also lent some support," he says, but Gold Prices are "continuing to yo-yo about."

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Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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