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Private investment in gold is still only 1% of global financial assets

In a report by the World Gold Council titledGold enhances portfolio performance and reduces risk for investors in alternatives” they have the following to say about the amount of private investment in gold:

New money into hedge funds and private equity has doubled AUM over the past decade. Over the same period, gold holdings by private investors have increased by 24%. Gold remains an under-owned asset making up only 1% of global financial assets in private hands.

[emphasis ours]

So despite private investment in gold increasing 24% over the past decade, it still only accounts for just 1% of global financial assets in private hands. This is very important to note because every-time the gold price drops you always hear the same thing; “the gold bubble has burst”.

(click for sharper image)

 

As we’ve mentioned many times before it is simply impossible for gold to be a bubble when hardly anyone in the world is investing in it – it stems for a lack of knowledge of what a ‘bubble’ actually is.

It’s interesting to note that still the most popular destination for investor investments is bonds (‘fixed income’). This is hardly surprising because they are perceived as ‘low risk’. However what the ‘bubble-talkers’ miss is that this is in fact where the true global bubble lies and it’s popping in in front of our very eyes.

One just need to look at Europe to see this occurring. First  Greece, then Ireland then portugal. And right now Italy’s bonds are on the verge with Spanish bonds not too far behind. Eventually all the bonds of these sovereigns (including the UK and the USA) will ‘pop’ because they will simply reflect the reality that practically all sovereign countries in the Western world are indeed insolvent and have no credible way of repaying the enormous debt they’ve accumulated over the past 30-40 years.

What people need to ask is just where those 48.7% of global investors will go to as the ‘great global bond bubble’ continues to ‘pop’? Even if just 1% went into gold that would be a 100% increase in the amount of gold investors that there are in the world.

But what happens if its 5%, 10%, 20% even? That would represent an enormous amount of new money flooding its way into gold which would have a dramatic effect in the price.

The entire report by the World Gold Council is well worth a read and certainly will leave the reader with the impression the gold is still hardly being invested in, despite on average raising 17% each and every year for the past 10 years.

In short, with just 1% invested globally in gold, the bull market in gold has a long, long ways to go yet.

 

Link to this article: : http://www.goldmadesimplenews.com/gold/private-investment-in-gold-is-still-only-1-of-global-financial-assets-5680/

Posted by on Nov 14 2011. Filed under Analysis, Gold News, Markets. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.

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