Dec 2012 Financial News

Scotia to sell gold

Dec 06, 2012

Scotiabank has become the first bank to offer gold as an investment vehicle in T&T. At a launch of its gold bullion certificates on Tuesday evening at the bank’s hospitality suite at the Queen’s Park Oval in Port-of-Spain, new Scotiabank managing director Anya Schnoor said: “In a low interest rate environment, we are trying to be innovative.”

With the sale of gold to investors, Schnoor said, “We think we have found one of the answers.” Referring to the performance of gold as an investment, Schnoor said: “When you look at the last 10 years, it’s hard to beat gold.” The gold bullion certificates are now being sold at Scotiabank T&T through its Precious Metals Division, Schnoor said.

She said globally, Scotiabank is one of the largest physical gold dealers in the world, buying and selling gold in New York, London, Hong Kong, Shanghai and Canada. Scotiabank gold certificates are issued to clients in lieu of the physical bullion.

These US$ gold certificates are backed by assets of the Bank of Nova Scotia. The market value of the gold will be quoted on the basis of the amount of metal ordered. Gold certificates will be available in minimum quantities of ten ounces of 99.99 per cent purity. The certificates are available to both individuals and companies.

Gold has been valued as a global currency, a commodity, an investment and an object of beauty, investors were told at the Oval. In an immediate reaction, T&T Stock exchange chief executive officer Wainwright Iton, who was present at the launch, said the new offer by Scotiabank is “a welcome addition.”

Quizzed about the possibility of the TTSE getting into the sale of commodity futures, he said this would become a possibility as the market becomes more sophisticated. “The gold market is deep and liquid with readily available stocks,” Scotiabank told investors on Tuesday evening in literature on the new investment vehicle.

“Gold mining is also spread across many geographical regions, making it less vulnerable to regional shocks. Compared to other commodities on the market, gold’s annualised volatility (1990-2009) was considerably less.” According to the World Gold Council in its investor’s guide to the gold market, annualised volatilities for that 20-year period were 41.2 per cent for oil, 25 per cent for copper, 23.1 per cent for soybeans and 15.9 per cent for gold.

As an indestructible commodity, gold can also be recycled back onto the market through the mobilisation of Central Bank reserves and the recycling of above ground stocks, when demand increases, thereby buffering price hikes, investors gathered at the Queen’s Park Oval were told.

Over the years, investors have looked to gold as a safe and secure investment to guard against financial and geopolitical turmoil, Scotiabank clients were told. Within recent times, gold investors have capitalised on the positive gains in the gold market as the 2007-2009 financial crisis put the commodity back into the spotlight, the bank said.

Supply and demand issues continue to make gold a lucrative investment and today there is good reason to believe that the demand for gold will remain strong after the financial crisis, Scotia said. “Investors now more than ever understand the need to diversify their portfolios with instruments like gold that retain value regardless of inflation and currency depreciation,” the bank said.

In a document explaining how investments in gold help the investor to hedge against inflation, the bank said: “Risk factors affecting gold are quite different from those that affect other assets in your portfolio. Adding gold to your portfolio will make it more robust and less volatile.

“As markets fluctuate, gold retains its purchasing power over the long run. It has remained stable for centuries compared to currencies which lose value as a result of inflation and currency fluctuations.”

Explaining its claim that gold investments are a currency hedge, the bank said: “The US dollar is the world’s main trading currency. When the US dollar appreciates, the price of gold falls; when the US dollar falls against other currencies, the price of gold increases. It is therefore an effective hedge against the US dollar’s weakness.”

Overnight high
According to Gold Price News, the gold price added to its recent losses yesterday as the US dollar rebounded from an earlier sell-off. The spot price of gold rose to an overnight high of US$1,708.24 per ounce, but later fell by as much as to US$8.62, or 0.5 per cent, to US$1,688.86.

In doing so, the gold price reached its lowest level since November 6 and is now on pace for its third weekly decline in the past four. The SPDR Gold Trust (GLD), the world’s largest gold ETF and most liquid gold price proxy, retreated by US$0.62 to US$163.80 per share.

Gold stocks took it on the chin yesterday morning despite only a modest drop in the price of gold. The Market Vectors Gold Miners ETF (GDX), comprised of many of the world’s largest gold producers, slid by US$1.01, or 2.2 per cent, to US$45.63 per share.

Commenting on the recent weakness in gold prices, UBS analyst Edel Tully wrote in a note to clients that it “was not influenced by external forces and was likely a reflection of some participants’ growing frustration that gold has not managed to climb above US$1,750/oz.”


Source:
Aleem Khan
Trinidad Guardian
Thursday December 6, 2012

http://guardian.co.tt/business/2012-12-06/scotia-sell-gold