Thomas Trauth, Blue Horizon Wealth Partner AG (Foto: Blue Horizon).
Zurich – The bullish market mood of January cooled significantly after European economic data indicated that recession might last longer than anticipated and will not end before Q2 of this year. The US Congress is unlikely to prevent the full spending cuts specified under the Budget Control Act, which will make for softer US economic data in the coming quarters.
In addition, the Italian elections have resulted in a deadlock situation with a long period of political bargaining and potential re-elections ahead of us. The only thing certain seems to be that Italy is very unlikely to follow the austerity path of Monti’s government, which re-established a great deal of credibility last year. Despite these negative points, we remain positive on the medium-term outlook and still see value, especially in equity markets. However, we are very worried about the recent gold price movements and outflows out of gold investment funds.
While, throughout 2012, we believed in improvements and stronger markets for risky assets, we are starting to ask ourselves whether we could end up in a phase of complacency and overheating. For now, however, we continue to be optimistic about the outlook for risky assets.
Gold prices about to collapse?
We have serious doubts as to whether gold can provide real safety and security if monetary systems should collapse. In the past, especially under the Bretton Woods system between 1944 and 1973, gold was used as a monetary anchor, but it is unlikely to serve that purpose in the future. Still, in the last 10 to 13 years gold prices have risen almost ten-fold on the back of economic crises and unprecedented monetary expansion. We understand how concerns aroused by those factors have been a major driving force for the recent gold price rally. Moreover, we fully appreciate the diversification value of gold in a portfolio context. (BH/mc/hfu)