The global gold rush continues to accelerate as investors duck for cover from falling currencies with Indonesia emerging as an Asian gold leader and investors adding mining companies to their portfolios for greater gold exposure.
The creation earlier this year of Indonesian bullion banks has expanded the appetite for gold in the country as has a recent bout of political and community unrest.
A woman hit out with a bamboo stick as police push back students during a protest outside the Indonesia parliament building. (Photo by Bay Ismoyo/AFP via Getty Images)
AFP via Getty Images
Over the past month the price of gold in rupiah, the Indonesian currency, has risen by 13%, a faster rate than the 11% rise in U.S. dollars, with the difference a measure of the rupiah’s decline against the dollar.
On the international market, gold is showing no sign of slowing its rapid rise in boom conditions, this week hitting an all-time high of $3753 an ounce, up 40% over the past 12 months.
Forecasts point to gold easily topping the $3800/oz mark in the next few days before stretching out to $3825/oz tipped by analysts at the Swiss investment bank UBS.
New price drivers are starting to have a significant effect on gold which started its rise three years ago thanks to heavy central bank buying, especially by countries keen to trim their exposure to the U.S. dollar.
Private investors are following the central banks either through direct exposure to bullion or via exchange traded funds with ETFs reported to have added 800,000 ounces to their collective holdings last week.
Ray Dalio’s 10% Gold Tip
Support for gold is also coming from investment leaders such as Bridgewater found Ray Dalio who is recommending a 10% portfolio allocation for the metal because of growing threats to the global monetary system.
Dalio told an investment conference in Singapore last week that a crisis is brewing in the U.S. where the government could spend $7 trillion this year but only raise $5 trillion.
He said all currencies were having trouble maintaining their roles as repositories of wealth, further adding to the case for gold.
Gold miners, which have lagged the rising price of their metal are starting to play catch up with some rising at a faster rate than gold.
Newmont, the world’s biggest gold producer, has seen its share price rise by 8% over the past week, more than twice the 3% rise in the gold price.
Barrick Mines, which is also benefiting from increasing exposure to copper, has risen by 21% in the past week.
The addition of mining equities to the gold investment case was predicted last week by a leading European fund manager at a mining conference in the U.S. city of Colorado Springs.
Ronnie Stoferle, managing partner of Lichenstein-based Incrementum, said gold and silver have had a great run but now is the time when gold and silver mining stocks will start to outperform.
He said investors were starting to look at the cash building in gold miners which are enjoying their widest profit margins in more than 50 years.