This Month in Gold – January 2012

Will European Sovereigns Have to Sell Their Gold?
MarketWatch – To make ends meet, European sovereigns may soon have to dig deep into their pocketbooks and jettison some of their gold reserves. At 2,452 tons, Italy enjoys the world’s fourth-largest gold reserves. Current value: $123 billion. Rome’s budget deficit for 2011: $80 billion. France, meanwhile, has bullion worth $122 billion and a budget deficit of $150 billion. China, on the other hand, owns very little gold. It is eagerly looking to diversify its reserves comprised largely of paper IOUs. When the bullion changes hands, so will the power, says MarketWatch.
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Bullion Could “Easily” Crack $2,000
The Telegraph – Richard Davis, manager of the BlackRock Commodities Income Investment Trust, told the UK paper The Telegraph in a video interview this month that gold could “easily” top $2,000 in the next twelve months. This is especially the case if investment demand remains strong. Davis notes that the macro concerns underlying investment demand are all still with us. Moreover, investment demand is the only factor that has ever driven a long-run bull market in gold. In inflation-adjusted terms, gold has yet to reach its 1980 peak of approximately $2,300, Davis points out.
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BoA Targets $2,000 – $2,500 Gold in 2012
CS Monitor – Sabine Schels, a commodities strategist at Bank of America Merrill Lynch, bucks the latest short-term hysteria following a correction in the price of gold and says it will continue its relentless climb in 2012. Schels believes gold will rally and reach $2,000 to $2,500 this year, noting there is no let up in investor interest anywhere on the horizon. The main drivers of investor interest, according to Schels, include the negative outlook for sovereign debt, loose monetary policy in the developed world, and the need for emerging market central banks to diversify their reserve holdings.
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The Ron Paul Portfolio
Total Return Blog, Wall Street Journal – US Representative and Republican Presidential candidate Ron Paul has placed the majority of his eggs in one basket: gold. Surprising? No, not really. Rep. Paul’s Congressional colleagues, mainstream money managers, and crony capitalists scoff at his portfolio’s extreme concentration in one asset class. The problem with their argument, however, is that few of them have made money as of late, notwithstanding flipping Treasuries. Representative Paul, on the other hand, has held true to his investment philosophy for the past 30 years. And events just keep proving him more and more right. Perhaps there is some logic to his use of fundamental values to guide his decisions – in politics as well as economics.
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