Jeff Clark, Casey Research, 03/07/2011
you already know the main reasons why you should own gold: as a protection against currency fluctuations, as protection against inflation, as memory, as a reassuring insurance.
These are reasons that now even in articles in the mass media to flourish. If we here add the imbalance of supply and demand, it has been the main reasons why you should keep gold in the near future.
All these factors point to a very positive development of gold, even though the yellow metal has risen in the last 10 years by 450%. No, it is not particularly not too late to shop,, if you do not have a reasonable amount of gold. And yes, I am convinced that gold prices will rise even more significantly, completely regardless of the corrections, which we will inevitably see.
Each of the aforementioned gold price drivers will have the effect of that gold in the coming years more and more increasing.
But there is another price driver that many observers miss, but certainly the mass media. I am to be convinced that this giant was once awakened from his sleep, it may inflame the price of gold in a way, as we have not yet experienced.
It is estimated that the total value of global Pension assets on - drum roll please - USD 31.1 trillion amount. No, this is not a typo. This is more than double the U.S. gross domestic product in 2010 (USD 14.7 billion).
We know some hedge fund managers like John Paulson, David Einhorn and Jean-Marie Eveillard, who invested in gold. There are about 20 investment funds that are dedicated to gold and precious metals. And there are a number of individual gold and silver fans who have purchased.
And what about the pension fund?
According to an estimate by Shayne McGuire, which he in his new book called "hard money: gold raise to a higher level of investment "is published, the typical pension fund holds about 0.15% of its assets in gold. He expects that a further 0.15% was invested in gold mining shares, with which we come to a total share of 0.3%. The pension funds invest less than one-third of a percentage point in the gold sector.
Shayne is head of global research department of the Teachers' Pension System of Texas. His estimate is based on the fact that the content of an average pension fund unit of raw materials amounted to 3%. 5% of 3% is accounted for by gold. No matter what scale you might land here too - the proportion of gold is on the Pension funds now simply insignificant.
Now comes the fun part. Let's say the managers understand as a group, that have become bonds, equities and property poor or risky investments, so they decide to increase their holdings in the gold market.
they would double their share of gold and gold stocks - which they had invested only 0.6% of its total assets in this area - you would be on new purchases of $ 93.3 billion.
How much is it?
The total stocks of the publicly traded gold funds GLD currently amount to USD 55.2 billion. The Amount would be 1.7 times larger than the asset base of the largest listed gold-commodity funds. SLV, the largest publicly traded silver fund, has net assets of $ 9.3 billion, equivalent to one-tenth of U.S. $ 93.3 billion.
The market capitalization of all stocks in the gold industry (producers only) is around USD 234 billion. The gold producers would therefore increase by 40% if the money would flow into this sector. The market capitalization of the gold producers would double the pension institutions would put only 1.2% of its total assets in this area.
But what if the currency problems completely out of control? What happens should the bonds remain on the track? What if the property sector would need another ten years until it has recovered? What if inflation becomes a wild beast, as it has been every time in the history of the case when governments spend their currencies too diluted?
Invested Pension Fund only 5% of its total assets in gold - an amount that would amount to $ 1.5 trillion - would overwhelm the whole market and drive prices higher.
We should also remember that it is the pension fund only to a class of financial institutions. The insurance companies hold assets of around USD 18.7 trillion. Hedge funds manage about $ 1.7 trillion. Sovereign wealth funds hold $ 3.8 trillion. Then there are stock funds, exchange-traded commodity funds as private equity funds and closed-fund assets. Consider here the investors millions of independently acting like you, John Smith and me to come then we to a number of perhaps $ 100 trillion.
I do not know if the pension fund as much money in the gold sector - but I know that with debt -related risks are far from over. The U.S. dollar and other currencies will decline against gold rises considerably in value. Interest rates will rise in the coming years all perspective further.
These issues affect today already and will build up in future. If there is a paradigm shift that leads to these managers see gold in a new light, then hold on tight!
I wanted this book first, "Why a gold price of $ 5,000 may be too low" to call, since that fund managers should first enter the gold market in large numbers, this tiny sector at breakneck speed the stratosphere is likely to shoot.
Source: propagandafront.de
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