Gold Investor - SPDR Gold Shares
Gold Investor - SPDR Gold Shares Gold Investor - SPDR Gold Shares
ConclusionGold should form an integral part of a central bank’s foreignreserveportfolio, especially in emerging markets. The optimalallocation to gold is consistently higher when considered froma domestic-currency perspective, with a resulting mid-riskoptimal allocation to gold of between 8.4% and 10% (comparedwith 4.6% to 7% in dollar terms). Additionally, including goldin the investment universe improved risk-adjusted returns forall nine emerging-market currency optimisations. Our analysispoints to gold’s consistent volatility across currencies, especiallyrelative to that of other reserve assets, like sovereign debt.When comparing gold to these other reserve assets, reservemanagers will already be aware of gold’s liquidity and lack ofcredit risk, but may also benefit from conducting an analysisto complement their US-dollar-based strategies. We haveshown that analysing a reserve portfolio from the perspectiveof emerging-market currencies can provide useful informationto portfolio managers on the optimal composition of foreignreserves. In particular, we found that gold’s optimal allocation,when seen from a domestic-currency perspective, is higherthan suggested by a US-dollar analysis. As central banksre-allocate to reflect these optimal allocations in an environmentof rising reserves, their gold purchases need to increase tokeep pace.Gold Investor | Risk management and capital preservation
AppendixTable 2 : EM central-bank gold purchases (sales) in tonnes as a function of FX-reserve growth and average gold allocation*ReserveAverage gold allocationsgrowth4% 4.6% 5% 6% 7% 8% 9% 10%-15% (1,532) (875) (385) 761 1,907 3,053 4,199 5,345-12% (1,378) (700) (194) 990 2,175 3,359 4,544 5,728-9% (1,225) (525) (3) 1,220 2,443 3,665 4,888 6,111-6% (1,072) (350) 189 1,450 2,711 3,972 5,233 6,494-3% (919) (175) 380 1,680 2,979 4,278 5,577 6,8770% (766) - 572 1,909 3,247 4,584 5,922 7,2603% (613) 175 763 2,139 3,515 4,891 6,267 7,6426% (459) 350 955 2,369 3,783 5,197 6,611 8,0259% (306) 525 1,146 2,599 4,051 5,503 6,956 8,40812% (153) 700 1,338 2,828 4,319 5,810 7,300 8,79115% 0 875 1,529 3,058 4,587 6,116 7,645 9,174*Reserve growth is a total figure and does not represent growth per annum. This analysis assumes a steady gold price of US$1776/oz – which represents theLondon PM fix of 28 September 2012. FX and gold reserve data is as of Q3 2012.Source: IMF, World Gold Council62_63
- Page 12 and 13: The interaction of all assets on av
- Page 14 and 15: • Strong global equity market per
- Page 16: • The Fed’s preferred measure o
- Page 20 and 21: The impact of foreign-exchange expo
- Page 23 and 24: Chart 4: Emerging market equity cor
- Page 25 and 26: Chart 6: The expected loss from hed
- Page 27 and 28: Chart 8: Regional distribution of g
- Page 29 and 30: Chart 9: Gold consumption per capit
- Page 31 and 32: Chart 11: Performance of emerging-m
- Page 33 and 34: The second period, between 2002 and
- Page 35 and 36: Table 3: Summary of portfolio perfo
- Page 37 and 38: ConclusionExchange-rate risk is a s
- Page 39 and 40: Gold is also used to lower the cost
- Page 41 and 42: Currency-hedged index constructionD
- Page 43 and 44: III: Tail-risk hedging:an internati
- Page 45 and 46: Unlike other assets, gold tends to
- Page 47 and 48: Chart 3: Research findings for opti
- Page 49 and 50: Chart 5: Improvement in performance
- Page 51 and 52: Chart 6: Performance of portfolio a
- Page 53 and 54: The role of gold during possible fu
- Page 55 and 56: ConclusionGold helps investors dive
- Page 57 and 58: IV: Foreign-reserve diversification
- Page 59 and 60: Optimal allocations to goldMethodol
- Page 61 and 62: Chart 1: US dollar as numéraire -
- Page 66 and 67: DisclaimersThis report is published
- Page 68: World Gold Council10 Old Bailey, Lo
AppendixTable 2 : EM central-bank gold purchases (sales) in tonnes as a function of FX-reserve growth and average gold allocation*ReserveAverage gold allocationsgrowth4% 4.6% 5% 6% 7% 8% 9% 10%-15% (1,532) (875) (385) 761 1,907 3,053 4,199 5,345-12% (1,378) (700) (194) 990 2,175 3,359 4,544 5,728-9% (1,225) (525) (3) 1,220 2,443 3,665 4,888 6,111-6% (1,072) (350) 189 1,450 2,711 3,972 5,233 6,494-3% (919) (175) 380 1,680 2,979 4,278 5,577 6,8770% (766) - 572 1,909 3,247 4,584 5,922 7,2603% (613) 175 763 2,139 3,515 4,891 6,267 7,6426% (459) 350 955 2,369 3,783 5,197 6,611 8,0259% (306) 525 1,146 2,599 4,051 5,503 6,956 8,40812% (153) 700 1,338 2,828 4,319 5,810 7,300 8,79115% 0 875 1,529 3,058 4,587 6,116 7,645 9,174*Reserve growth is a total figure and does not represent growth per annum. This analysis assumes a steady gold price of US$1776/oz – which represents theLondon PM fix of 28 September 2012. FX and gold reserve data is as of Q3 2012.Source: IMF, World <strong>Gold</strong> Council62_63
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