UBS, the Swiss investment and bullion bank, recommends Buying Gold now, before “a decisive policy response” to the financial crisis leads other investors to do the same read this article.
UBS began by noting that “Our five signals (Equity valuations remain well above the October 2011 lows; Positioning is short in base metals and less long in oil and gold – improving this contrarian signal; China’s policy stance is not sufficiently stimulative to trigger restocking, and we see structural declines in commodity intensity there; and, Europe and emerging markets are in the early stages of destocking, with no stocking due in the US) for commodities and miners keep us cautious on the sector. We anticipate another leg-down in commodities and mining stocks before sufficient stress emerges in markets to force a decisive policy response and create an attractive buying opportunity.”
UBS believes that investors “will Buy Gold and gold equities early this cycle” – correctly suggesting that it is right to move just ahead of the broader investor community, and buy gold and gold equities now.
Clearly, buying gold early into a downturn carries greater risks and will be volatile – consequently, they advise “investors [also] hold a short or underweight copper and copper equity position against it.”
London stock-broker Numis also said this week it is “bullish on gold” and also because it expects more quantitative easing from major central banks shortly.
Strong policy action to try and resolve the financial crisis is then likely to stimulate demand for industrial commodities.