Gold Essential “Safe Haven” Due to Greece … Spain, Italy, Ukraine, Lehman and “Bad Stuff”

from Gold Core Newstalk interviewed GoldCore’s Mark O’Byrne this morning about the investment asset that is not well understood – gold. The interview began with Nick Bullman of Newstalk asking Mark to explain the poor performance of gold in recent years as it has underperformed since 2008. goldcore_bloomberg_chart1_18-02-15 Click here to listen Gold prices rose every single year from 2000 to 2013 responded O’Byrne. It had “massively outperformed” due to many risks and on the expectation of major financial crisis and had as such had priced in the financial crisis of 2008 and protected investors during and after the crisis. Mark said that it was a matter of a classic bull market which frequently see “two steps forward and one step back” and lengthy periods of correction and consolidation. Gold in US Dollars - January 2007 to February 2015 (Thomson Reuters) Gold in US Dollars – January 2007 to February 2015 (Thomson Reuters) He pointed out that Goldcore had warned in 2013 that a sharp correction might be due as is normal in all bull markets. He referred to the severe retracement of the gold bull market of the 1970s where gold prices fell over 50% between 1975-76 before rising a further 800% in less than 4 years. Similar price performance could be seen in the coming years. Gold had not performed very well in recent years but he believes that the unfolding crisis in the Eurozone and the very uncertain economic picture globally would likely lead to higher gold prices in the coming years. He explained that the cost of mining one ounce of gold was, on average globally, $1,200 per ounce and that prices therefore could not fall below that level for any extended period of time He acknowledged that lower oil prices may bring costs of production down to some extent but that the cost of protection should stay above $1,000 per ounce. At the same time the current low prices relative to costs of production had caused some mining companies to fold or postpone production which will lead to tighter supply in the future. When asked why one should buy gold in a strong dollar environment and with deflation taking hold around the world he said that gold acts as a hedge against dollar and all paper currency devaluations. Monetary policy across that world is still incredibly loose with interest rates near 0% and with the EU about to begin its QE money printing program or “experiment”. He used the example of Russia whose gold owners have been very well protected during that country’s recent painful economic and currency crisis. He referred to recent academic research and the views of asset allocation experts like Ibbotson and Mercer who have shown gold is a classic “hedging instrument.” He said that gold’s ideal conditions are not those of deflation but that the degree of uncertainty in the world today was a compelling reason to own gold. Gold does in well in deflation as gold cannot go bust – “that’s why central banks are the biggest buyers of gold today.” The interviewer questioned gold’s hedge status referring to the brief fall in the gold price during the 2008 crisis, suggesting that investors used liquidity in gold to cover their losses. Continue Reading>>>

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