Market Commentary

To most investors, a key challenge is finding an appropriate framework of reference: what gold does, what it does not do, how and why it responds to various economic environments.

Italian business leaders (92%) and citizens (85%) overwhelmingly agree that the nation’s gold reserves have an important and positive role to play in the country’s economic recovery.

With a clear winner failing to emerge from the Italian elections in February 2013, the Italian political landscape has subsequently navigated an uncertain and challenging period. As a way forward has begun to emerge, it is clear that the new government faces several competing priorities.

We discuss the limitations of the most common arguments and contextualise gold’s price pullbacks. We examine structural shifts that gold market has experienced over the last decade resulting in a robust set of demand factors, very different from that seen during the 1970s.

This first edition of Gold Investor includes 4 papers: I. Q4 and full year 2012 gold investment commentary; II. Gold and currencies: hedging foreign-exchange risk; III. Gold and tail risk hedging: an international perspective IV. Gold and foreign-reserve diversification for emerging-markets central banks.

Across Europe, economic growth is faltering and in many Eurozone countries, sovereign debt yields are dangerously high.

The World Gold Council has been exploring ways that Eurozone Member States could use their gold reserves to help bring down the cost of borrowing.

We believe that using a portion of a nation's gold reserves to back sovereign debt would lower sovereign debt yields and give some of the Eurozone's most distressed countries time to work on economic reform and recovery.

The following video explores why such a measure could offer an alternative to austerity for the Eurozone.

This paper argues that using gold as collateral for highly distressed bonds would bring great benefits to the euro area in terms of reduced financing costs and bridge-financing. It is mindful of the legal issues that this will raise and that such a suggestion will be highly controversial. For this purpose…

Dr. Andrew Lilico, of Europe Economics, discusses his paper The use of Gold as Collateral for Eurozone Sovereign Debt. The paper assesses the World Gold Council’s proposals on gold as collateral for Eurozone sovereign debt, especially in the case of Italy and Portugal.

Leading European think tank the Centre for European Policy Studies (CEPS) analyses the impact on the gold market of various euro area economic scenarios.