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Market Updates Archive

Gold Top Pick at UBS' 18th Annual Reserve Management Seminar

Posted By: on Friday, June 15, 2012

By GoldCore (6/15/2012)

Confirmation of how gold is regarded very favourably by the official sector has come from the largest private gathering of central bank reserve managers, multi-lateral institutions, and sovereign wealth funds in the world - UBS' 18th Annual Reserve Management Seminar for Sovereign Institutions.

More than 80 institutions with collective assets under management of over $8 trillion attended the event and were polled regarding macroeconomic matters and their outlook for various asset classes.

Gold is seen as one of the assets likely to outperform again in 2012 due to risks posed to the euro and longer term risks for the dollar.

Those polled by UBS were also positive on emerging market debt. Both asset classes, gold and emerging market debt, were the top pick of 22.5% of the assembly – thereby accounting for 45% of the votes.

On gold’s role as a reserve asset, the importance reserve managers attach to the yellow metal has slipped back to 2009 levels, with about 14% having the opinion that it will be the most important reserve currency in 25 years. This marks a decline from the past two years’ surveys wherein over 20% viewed gold to be the most important reserve currency. 

This year’s survey confirmed that reserve managers anticipate that the dollar will fall from its pedestal as the sole reserve currency within the next 25 years.

In past surveys (conducted over the past decade) the dollar typically was tipped to remain the chief reserve currency by a plurality—if not a majority—of those polled. This time, like last year, over half of respondents believe that within 25 years a portfolio of currencies will supplant the dollar in that role.

Central bank buying has provided good support for gold this year, and indeed has been evident just when the yellow metal needed it most, with physical demand taking a step back. But the survey results from this year’s Reserve Management Seminar, particularly on what reserve managers are thinking in terms of gold’s role in their respective portfolios and corresponding allocations, suggests that official sector support is unlikely to continue in the same magnitude as seen in the last year. 

However, UBS notes that the potential for new entrants should not be underestimated. After all, there are still a lot of countries, particularly among the emerging markets, that are very much under-invested in gold from a global perspective.

The possibility of this group catching the baton from the current more prominent official sector buyers certainly cannot be ruled out.

The majority of those polled expect one or more countries to exit the Eurozone.

About 43% of respondents anticipate one country leaving the Eurozone, a further 29% expect two or more exits and the remaining 28% are in line with our call for no exit. The possibility of a Eurozone exit is seen as the chief risk to global economic and financial stability over a 12-month period by 39% of participants. The risk of Eurozone sovereign default is a close second at 34%. The majority also see global economic stagnation over the next 12 months, with 36% viewing deflation as a bigger risk than inflation.

Indeed, the macro picture in the eyes of the world’s sovereign institutions does not look all that bright this year.

Read full UBS Poll

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Disclaimer: Gainesville Coins "Market Updates and In the News Section" provide our readers with features and analysis of the financial markets, and some of the factors that may be affecting market direction. While the information is obtained from sources we believe to be reliable, we do not guarantee its accuracy or its completeness, and this information should not be considered investment advice. Gainesville Coins provides these articles for informational purposes only, and they do not constitute a recommendation by Gainesville Coins to hold, to purchase, or to sell any investment.

 
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