Gold to Be Best-Performing Asset for the Rest of the Year, UBS Poll Finds
Gold will be the best-performing asset for the rest of the year as investors seek to protect wealth from sovereign debt risks and economic turbulence, according to about 30 percent of respondents in a UBS AG survey.
The survey was conducted last week at a UBS seminar in Wolfsberg, Switzerland, of central bank reserve managers, multilateral institutions and sovereign wealth funds, the bank said in a report dated June 18. More than 25 percent said global equities would be the best performer, followed by U.S. Treasuries. Gold was the most popular response. Representatives of some 80 institutions attended.
Bullion reached a record $1,265.30 an ounce yesterday and has climbed 13 percent this year as investors bought the metal to protect wealth amid Europe’s sovereign debt crisis. Gold has outperformed other commodities as global equities declined, and holdings in exchange-traded funds backed by the metal reached all-time highs, while coin sales from mints accelerated.
“So long as fears about global debt sustainability and sovereign risk remain heightened, gold will continue to rise,” London-based UBS analyst Edel Tully said today in a separate report. “Against this backdrop, it is little wonder that nearly a quarter of respondents expect gold will be the most important reserve currency in 25 years’ time.”
Almost 50 percent of respondents said the dollar would be the most important reserve currency in 25 years. In third place, about 15 percent said an Asian currency will fulfill the role, UBS said. The euro came last at 6 percent.
Sovereign Default
The MSCI World Index of equities is down 4.7 percent this year, and raw materials as measured by the Reuters-Jefferies CRB Index have slid 7 percent. Returns on benchmark U.S. Treasuries have gained 4.5 percent this year. The euro has dropped 14 percent against the greenback this year.
Gold for immediate delivery traded at $1,235.03 an ounce at 11:17 a.m. in London. The commodity is headed for a 10th consecutive annual gain, the longest winning streak since at least 1920, amid speculation that debt-cutting measures by European nations will slow growth.
Sovereign default is the main risk to the global economy in the next year, according to about 35 percent of those surveyed. European recession worries came second with more than 20 percent of responses.
Credit Products
Asked about the biggest change to their institution’s asset allocation over the next 10 years, respondents favored adding more credit products, buying more Asian currencies and cutting dollar holdings over either acquiring more gold or reducing holdings of the precious metal. More said they would buy gold than cut it.
“Our expectation for 2010 is that the official sector will be a net buyer of gold,” Tully said. “In many ways this is one of the largest fundamental shifts that the gold market has experienced in the recent past.”
Central banks and governments added 425.4 metric tons last year to 30,116.9 tons, the most since 1964 and the first expansion since 1988, data from the World Gold Council show.
To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net.
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