Investment Insights

This first edition of Gold Investor includes 4 papers: I. Q4 and full year 2012 gold investment commentary; II. Gold and currencies: hedging foreign-exchange risk; III. Gold and tail risk hedging: an international perspective IV. Gold and foreign-reserve diversification for emerging-markets central banks.

This paper explores the advantages and costs associated with hedging foreign-exchange exposure. With current prospects for domestic equity returns uncertain and bond yields low across most developed economies, the interest among investors in allocating a greater proportion of assets in new markets has been growing.

This article discusses the benefits of including gold as a tail-risk hedge from an international perspective and compiles research findings from previous studies.

This paper argues that using gold as collateral for highly distressed bonds would bring great benefits to the euro area in terms of reduced financing costs and bridge-financing. It is mindful of the legal issues that this will raise and that such a suggestion will be highly controversial. For this purpose…

Dr. Andrew Lilico, of Europe Economics, discusses his paper The use of Gold as Collateral for Eurozone Sovereign Debt. The paper assesses the World Gold Council’s proposals on gold as collateral for Eurozone sovereign debt, especially in the case of Italy and Portugal.

Leading European think tank the Centre for European Policy Studies (CEPS) analyses the impact on the gold market of various euro area economic scenarios.

Gold as Collateral for Eurozone Sovereign Debt - The World Gold Council (WGC) has commissioned Europe Economics to provide a politico-economic assessment of its proposal for the use of gold as collateral for Eurozone sovereign debt, especially the debt of Italy and Portugal.

This report examines gold's role within a sterling-denominated investment portfolio. It uses the respected Michaud et al.'s unique Resampled Efficient Frontier™ optimisation technology to allow analysis of the statistical significance of gold for adding diversification value. The report shows how gold performs as a portfolio diversifier, a preserver of wealth and a risk management mechanism, which is particularly important during times of economic and market stress.