Gold’s been up more than $100 since I last wrote about the precious metal three months ago. It’s not been trading around current levels for almost four years and the recent $1,350 an ounce high was an important chart breakout ending a bear market.
In June I wrote about the many forces propelling gold prices to beat the S&P 500 so far this year, most critically a weakening US dollar and unpredictable new US president.
Those forces gathered strength over the summer with the euro rising to $1.20 and Donald Trump engaging in a furious war of words with North Korea, a crisis that could become a nuclear war.
For followers of the gold price it was the final break out above $1,300 last month that was most impressive and the quick sprint up in the price to $1,350 an ounce. At the very least gold now looks to have moved to trading in a higher price band.
Will it do more than that this autumn? What has changed under the hood of the global economy?
Dollar weakness is certainly a new factor. After 12 years of dollar strength we now have a declining global reserve currency. Gold and other commodities like oil are priced in dollars so tend to inflate in price as the dollar devalues.
At the same time the global credit cycle is finally turning down after a decade of expansion after the global financial crisis.
The US Federal Reserve has now raised interest rates three times. You might expect higher interest rates to boost the dollar but rather this is seen as a sign of slowing growth opportunities for US assets and a negative for investors.
Why then is the US stock market still so sky high? Well that’s now down to a concentration of speculation into a very limited number of stocks in the Nasdaq. Lesser company stocks have already fallen.
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Read more from Peter Cooper:
Time for some crash protection as US stocks hit record overvaluation
Are stocks that multiply 100 times in value a myth?
A midsummer lesson from the IMF on the dirham, dollar and pound
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The possibility that this house of cards will collapse under the weight of higher interest rates is what keeps central bankers up at night. They know this game cannot continue forever.
So the smart money is buying gold futures as a hedge against armageddon in financial markets, though not yet the physical stuff for which demand is lower than last year.
As the gold price is set in the futures market that imbalance can always be corrected in the future, and indeed gold futures are predicting that it will be.
One event to look out for is the collapse of the cryptocurrencies, now under assault from central banks around the world worried about losing control over the global monetary system and a speculative bubble.
While gold prices have reached $1,350 for the first time in ages, the digital bellwether bitcoin has crashed $2,000 from its recent high of $5,000 a coin, albeit with a rebound on Friday.
Last week JP Morgan chief executive Jamie Dimon said bitcoin was ‘a fraud. It’s worse than tulip bulbs. It won’t end well. Someone is going to get killed.’
Even the UAE Central Bank is about to publish a study into how to regulate digital currencies.
Could it be that money from a crash in cyptocurrency speculation will now find its way into a bubble in precious metals instead?
Certainly bitcoin and almost a thousand other digital currencies have attracted a lot of hot money in search of instant riches as a giant Ponzi scheme paying out to early investors while leaving long term holders exposed to a wipe out situation.
But why should investors in overvalued global financial markets and hot-air speculations like digital currencies retreat into precious metals at this stage in the cycle?
It’s an insurance policy against disaster and a diversification that always has a residual value. Gold or silver, at least in physical form, is the oldest form of money, a real asset that cannot be spirited away by plunging global stock markets, nor lost as computer code containing supposed riches.
And all it takes is a relatively small number of investors around the world to decide to allocate five to 10 per cent of their wealth to gold and silver to radically improve its valuation.
Now you have to ask yourself how things look around the world for investors this autumn. True global economies are not performing that badly despite the uncertainty and instabilities of Donald Trump and the hiatus over British plans to leave the European Union.
Then again this could all be a time lag effect. What we see now is economics reflecting past good policy and not the bold new future offered by neo-nationalism and restrictions to free trade, higher interest rates and weaker stock markets.
Even if you disagree that global economics will go this badly wrong then few commentators would seriously challenge the notion that the US stock market is now seriously overvalued and due for a correction. They only argue about exactly when this will happen.
At the same time the global credit cycle has definitely shifted to higher interest rates and that is the usual precursor to an economic recession. These are just the facts of life this autumn.
Those who think that this time will not be different are holding their noses and buying precious metals. This is why the price is going up and could astonish us all in the near future.
Just look at how bitcoin prices suddenly took off. Will gold coins be next?
For the best investment opportunity in the precious metals complex look at the mining shares where the recent metal price rises have not yet been reflected in higher share prices.
The two top exchange traded funds for shares in the producers of gold and silver respectively are GDX and SIL, or if you want the more risky junior shares then GDXJ and SILJ should offer the highest leverage if gold prices move sharply higher.
But beware of being too aggressive as leverage also exaggerates losses as well as profits. Leave the losses to those unable to part with their digital currencies.
Peter Cooper has been writing about investment in the Gulf for over two decades
'Unrivaled: Why America Will Remain the World’s Sole Superpower'
Michael Beckley, Cornell Press
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
If you go...
Fly from Dubai or Abu Dhabi to Chiang Mai in Thailand, via Bangkok, before taking a five-hour bus ride across the Laos border to Huay Xai. The land border crossing at Huay Xai is a well-trodden route, meaning entry is swift, though travellers should be aware of visa requirements for both countries.
Flights from Dubai start at Dh4,000 return with Emirates, while Etihad flights from Abu Dhabi start at Dh2,000. Local buses can be booked in Chiang Mai from around Dh50
Crazy Rich Asians
Director: Jon M Chu
Starring: Constance Wu, Henry Golding, Michelle Yeon, Gemma Chan
Four stars
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MOST%20POLLUTED%20COUNTRIES%20IN%20THE%20WORLD
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MATCH INFO
Uefa Champions League final:
Who: Real Madrid v Liverpool
Where: NSC Olimpiyskiy Stadium, Kiev, Ukraine
When: Saturday, May 26, 10.45pm (UAE)
TV: Match on BeIN Sports
COMPANY%20PROFILE
%3Cp%3E%3Cstrong%3EName%3A%20%3C%2Fstrong%3EKinetic%207%3Cbr%3E%3Cstrong%3EStarted%3A%3C%2Fstrong%3E%202018%3Cbr%3E%3Cstrong%3EFounder%3A%3C%2Fstrong%3E%20Rick%20Parish%3Cbr%3E%3Cstrong%3EBased%3A%3C%2Fstrong%3E%20Abu%20Dhabi%2C%20UAE%3Cbr%3E%3Cstrong%3EIndustry%3A%3C%2Fstrong%3E%20Clean%20cooking%3Cbr%3E%3Cstrong%3EFunding%3A%3C%2Fstrong%3E%20%2410%20million%3Cbr%3E%3Cstrong%3EInvestors%3A%3C%2Fstrong%3E%20Self-funded%3C%2Fp%3E%0A
The smuggler
Eldarir had arrived at JFK in January 2020 with three suitcases, containing goods he valued at $300, when he was directed to a search area.
Officers found 41 gold artefacts among the bags, including amulets from a funerary set which prepared the deceased for the afterlife.
Also found was a cartouche of a Ptolemaic king on a relief that was originally part of a royal building or temple.
The largest single group of items found in Eldarir’s cases were 400 shabtis, or figurines.
Khouli conviction
Khouli smuggled items into the US by making false declarations to customs about the country of origin and value of the items.
According to Immigration and Customs Enforcement, he provided “false provenances which stated that [two] Egyptian antiquities were part of a collection assembled by Khouli's father in Israel in the 1960s” when in fact “Khouli acquired the Egyptian antiquities from other dealers”.
He was sentenced to one year of probation, six months of home confinement and 200 hours of community service in 2012 after admitting buying and smuggling Egyptian antiquities, including coffins, funerary boats and limestone figures.
For sale
A number of other items said to come from the collection of Ezeldeen Taha Eldarir are currently or recently for sale.
Their provenance is described in near identical terms as the British Museum shabti: bought from Salahaddin Sirmali, "authenticated and appraised" by Hossen Rashed, then imported to the US in 1948.
- An Egyptian Mummy mask dating from 700BC-30BC, is on offer for £11,807 ($15,275) online by a seller in Mexico
- A coffin lid dating back to 664BC-332BC was offered for sale by a Colorado-based art dealer, with a starting price of $65,000
- A shabti that was on sale through a Chicago-based coin dealer, dating from 1567BC-1085BC, is up for $1,950
Skewed figures
In the village of Mevagissey in southwest England the housing stock has doubled in the last century while the number of residents is half the historic high. The village's Neighbourhood Development Plan states that 26% of homes are holiday retreats. Prices are high, averaging around £300,000, £50,000 more than the Cornish average of £250,000. The local average wage is £15,458.
COMPANY%20PROFILE
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CONFIRMED%20LINE-UP
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