Gold Investor - SPDR Gold Shares
Gold Investor - SPDR Gold Shares Gold Investor - SPDR Gold Shares
Macroeconomic events: support andchallengesOver the fourth quarter, gold prices across multiple currenciesedged lower. Macroeconomic events were sparse and mixed intheir support for gold (see Chart 1 and Table 1), and with yearendapproaching, selling pressure dominated.The re-election of President Obama provided some supportfor gold apparently securing the continuation of existing Fedmonetary-policy programmes – through an extension ofChairman Bernanke’s term.A softening in Indian demand may have been expected bysome – though anecdotal evidence suggests otherwise – asthe largest gold consumer saw a resumption of currencydepreciation (3.7% in the fourth quarter). 2 India’s continuingstruggle with a trade deficit in 2012 led to regulatory actionintended to curb gold imports.Continued support from central banks’ quantitative-easingprogrammes came in the form of the 12 December statementfrom the Fed. With the end of “Operation Twist”, the Fed’smonetary policy committee (FOMC) announced a transitionfrom its yield-curve-adjustment programme to a new roundof monetary expansion. This will take the form of straightpurchases and continues the Fed’s four-year programmeof unconventional easing. However, exercising caution, theFed also announced thresholds for policy normalisation inaddition to the existing date-based thresholds. Although thiswas not the first time markets had to digest the finite natureof unconventional monetary policy, the additional bitter pillsprecipitated a sharp reactionary rise in longer-term interestrates. These dynamics elicited a mixed response from gold.On one hand, the continued debasement of the US dollar andthe longer-term risks of higher inflation played into the hands ofsome investors. On the other hand, some market participantswere concerned that the Fed’s more reticent support for openendedand unlimited support would signal an approaching end ofcurrent monetary accommodation – reducing systemic risk andinflation fears.National elections were held in the world’s third largesteconomy, Japan. The Liberal Democrat Party, led by ShinzoAbe, returned to power with tough rhetoric on the economy andregional diplomatic crises – two themes that provide supportfor gold via expansion of unconventional policy and a rise ingeopolitical tension.Central banks continued to add to reserves, as announced bythe IMF in December, with a surprise resumption of purchasesby Brazil’s central bank after more than a decade of inactivity.A compilation of central banks’ gold transactions can be found athttps://www.gold.org/government_affairs/gold_reserves/.As 2012 drew to a close, uncertainty surrounding the ability ofCongress in the US to avert an immediate automatic spendingand taxation hit to the economy, also known as the ‘fiscalcliff’, influenced gold positioning. However, as confidence of aresolution grew – even one that would not address some of thebroader problems in the US – investors’ minds were eased andflows into equities increased.2 Please see Gold Demand Trends, released in February 2013 for an update on supply and demand trend developments.Gold Investor | Risk management and capital preservation
Price performance: Gold ends the year on a bittersweet note, but annual performanceis reflective of underlying driversChart 1: Gold (US$/oz) performance and key events during Q4 2012US$/oz1,8001,750231,7001,6501,60014561,5501,50001/201204/2012 07/2012 10/2012 01/2013Gold (US$/oz) Gold market events Central bank events Macro eventsSource: Bloomberg, World Gold CouncilTable 1: List of relevant events during Q4 2012DateEvent1 6 November 2012 President Obama wins the US election setting the stage for more government spending2 19 November 2012 RBI puts forth stricter guidelines on bank financing of gold purchases3 13 December 2012 FOMC announces larger balance sheet expansion and unemployment linked-interest rate policy4 16 December 2012 Landslide victory returns Shinzo Abe’s Liberal Democrats to power in Japan5 19 December 2012 IMF announces that Brazil, Russia and the central bank of Iraq purchased gold6 31 December 2012 In a last minute deal, the US averts automatic spending cuts and tax increasesSource: World Gold Council04_05
- Page 8 and 9: In US dollar terms, prices fell dur
- Page 10 and 11: Volatility: low levels belie nervou
- 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
Price performance: <strong>Gold</strong> ends the year on a bittersweet note, but annual performanceis reflective of underlying driversChart 1: <strong>Gold</strong> (US$/oz) performance and key events during Q4 2012US$/oz1,8001,750231,7001,6501,60014561,5501,50001/201204/2012 07/2012 10/2012 01/2013<strong>Gold</strong> (US$/oz) <strong>Gold</strong> market events Central bank events Macro eventsSource: Bloomberg, World <strong>Gold</strong> CouncilTable 1: List of relevant events during Q4 2012DateEvent1 6 November 2012 President Obama wins the US election setting the stage for more government spending2 19 November 2012 RBI puts forth stricter guidelines on bank financing of gold purchases3 13 December 2012 FOMC announces larger balance sheet expansion and unemployment linked-interest rate policy4 16 December 2012 Landslide victory returns Shinzo Abe’s Liberal Democrats to power in Japan5 19 December 2012 IMF announces that Brazil, Russia and the central bank of Iraq purchased gold6 31 December 2012 In a last minute deal, the US averts automatic spending cuts and tax increasesSource: World <strong>Gold</strong> Council04_05
Change language