Gold rush not over yet, say German wealth managers

A chart of gold price fits nicely on top of the expansion of money in the developed world recently, according to Germany’s Concept Vermoegensmanagement, which expects both to continue heading in much the same direction.

Thomas Bartling from the German investment manager said ‘safe havens’ should continue performing in 2012, as the world remains a risk-laden place.

His enthusiasm for bullion as a result was echoed, to a point, by Manuela Thies, who runs the Allianz RCM Reale Werte fund.

She has about 11% in bullion exposure, and added she also felt gold miners were at “extremely good valuations. We have low weightings in gold miners now, but we could increase that for our investors,” she said.

Last year, safe harbours such as gold, and US shares, were some of the few exceptions to assets that lost money.

Emerging markets, widely tipped to receive large inflows from the start of 2011, fell by between 31% (China), 25% (India) and 18% (Brazil), for euro-based investors, for example.

Only American’s markets, in the developed world, showed resilience by rising 3% (Nasdaq), 6% (Dow Jones All Industrials) and S&P 500 (flat).

It was oil (up 15%), and gold (10%) that made money as investors looked for safety.

Bartling told investors as Fonds Kongress in Mannheim this should continue this year.

He said equities may go into a “brief bear market rally”, crash if the economics of the developed world and in particular eurozone deteriorate.

If central banks print money to repair liquidity – and banks – then expect further debasement of fiat currencies, he said.

Bartling presented some shocking statistics on past debasement since 1970. The amount of US dollars that would buy 100 grams of bullion back then would only buy 2.53 grams. For the euro, using a modelled back-testing, the amount to buy 100g in 1970 would buy 6.3g today.

While paper currencies have clearly cheapened, gold made 9.55% a year, on average, since then.

“It has no credit risk, is always liquid as a global currency, it is understood by everyone and, long term, there is no inflation risk (if you own it). Gold is the safest way to retain the value of your assets,” he said.

   “Meanwhile the whole financial and monetary system remains on a knife-edge. Both [the Fed’s] Ben Bernanke and [ECB’s] Mario Draghi will seek to lower rates and have looser monetary policy. Both gold and gold miners [shares] will be in demand for the next few years.”

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