Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks Bull Market Smoking Gun - 25th May 24
Congress Moves against Totalitarian Central Bank Digital Currency Schemes - 25th May 24
Government Tinkering With Prices Is Like Hiding All of the Street Signs - 25th May 24
Gold Mid Tier Mining Stocks Fundamentals - 25th May 24
Why US Interest Rates are a Nothing Burger - 24th May 24
Big Banks Are Pressuring The Fed To Losen Protection For Depositors - 24th May 24
Another Bank Failure: How to Tell if Your Bank is At Risk - 24th May 24
AI Stocks Portfolio and Tesla - 23rd May 24
All That Glitters Isn't Gold: Silver Has Outperformed Gold During This Gold Bull Run - 23rd May 24
Gold and Silver Expose Stock Market’s Phony Gains - 23rd May 24
S&P 500 Cyclical Relative Performance: Stocks Nearing Fully Valued - 23rd May 24
Nvidia NVDA Stock Earnings Rumble After Hours - 22nd May 24
Stock Market Trend Forecasts for 2024 and 2025 - 21st May 24
Silver Price Forecast: Trumpeting the Jubilee | Sovereign Debt Defaults - 21st May 24
Bitcoin Bull Market Bubble MANIA Rug Pulls 2024! - 19th May 24
Important Economic And Geopolitical Questions And Their Answers! - 19th May 24
Pakistan UN Ambassador Grows Some Balls Accuses Israel of Being Like Nazi Germany - 19th May 24
Could We See $27,000 Gold? - 19th May 24
Gold Mining Stocks Fundamentals - 19th May 24
The Gold and Silver Ship Will Set Sail! - 19th May 24
Micro Strategy Bubble Mania - 10th May 24
Biden's Bureau of Labor Statistics is Cooking Jobs Reports - 10th May 24
Bitcoin Price Swings Analysis - 9th May 24
Could Chinese Gold Be the Straw That Breaks the Dollar's Back? - 9th May 24
The Federal Reserve Is Broke! - 9th May 24
The Elliott Wave Crash Course - 9th May 24
Psychologically Prepared for Bitcoin Bull Market Bubble MANIA Rug Pull Corrections 2024 - 8th May 24
Why You Should Pay Attention to This Time-Tested Stock Market Indicator Now - 8th May 24
Copper: The India Factor - 8th May 24
Gold 2008 and 2022 All Over Again? Stocks, USDX - 8th May 24
Holocaust Survivor States Israel is Like Nazi Germany, The Fourth Reich - 8th May 24
Fourth Reich Invades Rafah Concentration Camp To Kill Palestinian Children - 8th May 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Insuring Your Pension Savings With Gold

Commodities / Gold and Silver 2011 Feb 11, 2011 - 12:30 PM GMT

By: Adrian_Ash

Commodities

How much gold is too much gold if you're a fixed-income investor...?

GOLD DOESN'T pay any income, of course. Which is why retirees and pensioners should hate it.


But since gold cannot go bust – and because its tight supply typically finds strong demand when cash loses value to inflation in the cost-of-living – gold in fact makes the perfect insurance for fixed-income investments like corporate or government bonds. At least, that's what €39 million gold investor Stichting Pensioenfonds Vereenigde Glasfabrieken says.

Crazy name, crazy Dutch fund managers! SPVG holds a massive 13% of its assets in gold, running a total €300m ($400m) to try and ensure a pension for workers past and present at the Schiedam, Netherlands glass manufacturer.

That compares with the typical 5% or 10% allocation which even the friendliest gold-friendly advisors might suggest. And seeing how the average European pension fund holds 2.7% in ALL commodities, never mind just gold, Holland's central bank, De Nederlandsche Bank (DNB), thinks SPVG is nuts. And so – as its regulator – it's given the fund two months to slash its gold position to below 3% of assets.

Good call? Not if you're holding a full 85% of your savings in fixed-income bonds, all denominated in the Euro, and primarily issued by the Dutch or German governments, says SPVG in a statement. Speaking to Investment & Pensions Europe, board member Rob Daamen picks up the story...

"[The gold purchase] was a way to secure the pension fund's assets value. If we win our appeal against the instruction of the DNB [to sell] we can claim compensation for any loss we might incur."

Did you get that? A pension fund obliged by law to defend its members' savings – and doing a very good job of it by all accounts – bought gold to secure its asset value. It's seeking a legal decision that means it can then sue the central bank if selling down those gold holdings means the fund loses value overall.

"The decision to raise the gold allocation [doubling it in October 2009, while selling off the fund's 17% position in equities] was made in the expectation that the stock market's rise would not be sustainable and a considerable downward correction was likely to follow." Which has paid off handsomely regardless of the broader stock-market's continued gains, especially in terms of the faltering Euro which denominates pretty much all of SPVG's other investments.

Zero-yielding gold might look worthless to retirees and pension savers, in short. But if you're entirely reliant on fixed-income debt – as the SPVG has become, matching its liabilities to its assets to make sure it can pay its members their pensions – then it's all-the-more important to insure your savings against inflation, currency loss and default.

At least, that 's what a glass-company's pension fund in Holland believes, holding pretty much only AAA-rated government debt and stateless, debt-free gold bullion as a warranty on its members savings.

By Adrian Ash
BullionVault.com

Gold price chart, no delay   |   Buy gold online at live prices

Formerly City correspondent for The Daily Reckoning in London and a regular contributor to MoneyWeek magazine, Adrian Ash is the editor of Gold News and head of research at www.BullionVault.com , giving you direct access to investment gold, vaulted in Zurich , on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2011

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in