GOLD INVESTMENT REPORT

The advantages of investing in gold

Private investors today are faced with a bewildering number of options when it comes to finding the right home for their money. Advice on how, when and where to invest is available from hundreds of different sources. But the need to maintain a well diversified savings/investment portfolio is advice with which all competent financial advisors would agree. Choosing the right mix for a portfolio depends wholly on the circumstances and objectives of the individual investor. Whatever criteria are selected, however, there is probably no better recommendation than the portfolio strategy endorsed by Swiss bankers, whose classic advice is to hold at least 5% in gold.

The tangible international asset

For thousands of years, gold has been mans premier store of value, more trusted world wide by individuals than any paper investment or paper currency. Gold cannot be inflated by printing more of it. It cannot be devalued by government decree, and, unlike paper currency or many other kinds of investments [such as stocks and shares], gold is an asset which does not depend upon anybodys promise to repay.

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Rare
Although gold has been mined for more than 6,000 years, only about 110,000 metric tonnes have ever been produced. If you could bring it all together, that is just enough to make a cube measuring only 18 metres along each side. Because of the scarcity, gold is one of the most sought after metals on earth. Gold cannot be fabricated by man. Nature limits its supply. The amount of new gold mined each year totals less than 2,000 metric tonnes - an amount that could be fitted comfortably into the living room of a small modern house.

Gold - the ideal hedge...

...against long-term inflation Throughout recorded history, gold has held its value against inflation. Experts say, for example, that the same quantity of gold is needed to buy a loaf of bread today as in sixteenth century England. This is why so many investors worldwide see it as the ultimate asset - an important and secure part of their investment portfolios. ...against devaluation Gold has an international value that tends to respond to the changes in value of national currencies. Time and again, gold has proved a successful hedge against the devaluation of an investors national currency. ...against a severe downturn in stocks & shares Gold is one of the few investments that has survived - and even thrived - during times of economic uncertainty. Gold is mans classic hedge against almost any monetary crisis, moving independently of paper investments.

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For example, in the slump following the Wall Street Crash, from September 1929 to April 1932, the Dow Jones Industrial Index slid from 382 to 56 - a drop in value of 85% - and some 4,000 U.S. banks closed their doors. Meanwhile, the price of gold actually went up. Gold also increased in value during the events following Black Monday, October 19, 1987, when the Morgan Stanley index of world shares fell 19% over 10 days. And during the mini-crashes which have afflicted the stock markets since then, gold has held its value and ignored the travails of share investment.

How are the prices of precious metals determined?

Gold prices are based on the underlying price of gold bullion plus a small premium. The most common benchmark for the price of gold is the London gold fixing, but gold is also traded continuously throughout the world based on the intra-day spot price.

What is the gold fix or London fixing?

The market-clearing price of gold is set twice a day in London. It is commonly called the Gold fixing (AM and PM) or simply the gold fix. This price, which is the international benchmark price, is set in US dollars per fine troy ounce of gold. Fix values and historical data are published by the LBMA.

Why do gold prices increase at times of economic uncertainty?

Gold prices are on track to rise for the 12th consecutive year, during a time when the stock market has seen the most breathtaking swings in decades. Unlike most other markets, precious metal price rises represent demand or sentiment rather than actual production (supply). Gold is still regarded in part as a currency, but unlike a fiat currency it cannot be created (or have more printed in the case of paper money), it has to be mined and production can only increase slowly due to its rarity. Prices therefore stay more constant whilst the value of fiat currencies and commodities fluctuate. In times of political and economic uncertainty, gold is largely regarded a hedge against rising prices and a safe haven during times of crisis.

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What makes gold such a stable commodity in terms of price?

Unlike other commodities, particularly other metals, gold is stored for the long term with almost all the gold ever mined being stored in the form of bullion and jewellery. Even the small amount of gold used in electronics is usually recycled. So most of the gold thats ever been mined is still around in one form or another, allowing for the stability of prices. Other metals such as copper are mined for immediate use for different practical purposes meaning as supply and demand levels change, prices change. And while other commodity prices are more contingent upon these changes in production (more or less is discovered and mined), gold values are more impacted by sentiment or demand as mining has only increased by figures of approximately 2% a year. Finally, the value of gold is not tied to any other commodities. For example, other commodities are often tied to oil prices per barrel, which are extremely volatile. The same isnt true for gold, which functions more like a currency than a commodity.

The gold market previously experienced a boom and bust, why did this happen and how does it compare to the current market?
In the early to mid-1970s, gold prices gradually increased as the US took the US dollar off the gold standard, and lifted a four-decade ban on the private purchase of gold. Inflation rose reaching 12% in the US and double figures in most Western countries. With this economic uncertainty, investors turned to gold as a hedge against devaluing currencies. In December 1979, the Soviet Union invaded Afghanistan, and political instability suddenly drove the price of gold up considerably. Gold prices reached an all-time high on 21 January 1980 of US$850 (inflation adjusted, a figure of US$2,079). At these prices, there was a rush to sell gold, from investors to the general public, leading to an oversupply. Coupled with an increase in interest rates and central banks selling off their gold, prices crashed. Although prices have been rising in the past decade, they still dont compare to the inflation adjusted prices of US$2,079 in 1980. The public awareness of gold is not as it was in the 1980s with only approximately 1% of investors holding physical gold in their investment portfolios. And today, monetary easing and widespread economic issues have led central banks to continue purchasing gold as a means to diversify reserve portfolios away from traditional reserve currencies and hedge against further economic instability.

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Is the gold market in a bubble?

Many commentators have speculated that gold is in a bubble, that the market is likely to follow the dot com and real estate crashes. However, market analysts argue that the price of gold is not going up because of speculation or because of a bubble; it is going up because of what it represents. It signals loss of purchasing power with fiat currency (paper money). Money is being created to buy out sovereign debt, driving the value of money down. As gold is independent of government laws, it does not lose value like fiat currencies. Key market strategists argue that the idea that the gold market is in a bubble is fostered by the media and has little basis. After the Second World War, a system similar to a Gold Standard was established by the Bretton Woods Agreements. Under this system, countries fixed their exchange rates relative to the U.S. dollar and as the US promised to fix the price of gold at approximately $35 per ounce. Implicitly, then, all currencies pegged to the dollar also had a fixed value in terms of gold.

Why are central banks in emerging markets purchasing more gold?

Last year (2012) saw another increase in central bank net purchases of physical gold, largely for emerging markets. Demand of 534.6tonnes in 2012 was the highest in almost 50 years. Brazil, for example, purchased 1.7 tons of gold in Q3 of 2012, the first reported addition to its reserves since June 2005. Amid monetary easing and widespread economic issues, these countries are diversifying their portfolios away from traditional currency reserves that they have built up by exporting goods to Europe and N. America.

Why is India buying so much gold?

India in particular has high gold demand with each person owning, on average, around two thirds of an ounce in gold, for both cultural and investment reasons. Saving accounts for 30% of Indias GDP, and as over half of Indians have no access to commercial banks, investment in physical gold is popular. Indian consumers are also consistent buyers of gold for cultural reasons, having the worlds largest gold jewelers market. By volume, demand for jewellery in India increased in 2012 by 35% to 153 tons and by value it rose 37% to $8.47 billion.

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What is the high and low end prices forecasted through 2013?
The high and low end prices of 23 market forecasters can be found at the LBMA website. The forecast average for 2013 is US$1,753, with forecasts ranging from US$1,400 to US$2,100.

GOLD MINE PARTNERSHIP OPPORTUNITY

Kendrick Zale are pleased to announce we are now offering our clients the opportunity to participate in owning a proportion of an active gold mine.
The yellow metal has been an investors favourite during times of worldwide financial and political uncertainty due to its perceived qualities as a safe haven and as a hedge against inflation. Previously, the easiest way for investors to speculate on the price of gold was to buy the physical commodity directly, or buy shares in gold mining companies. IPR is currently offering the opportunity for investors to purchase a share of the economic benefits of the mining rights of the IPR Capital mining project.

Kendrick Zale is acting as a principle agent for IPR Capital Ltd. To learn more about this exciting opportunity, or to register to open an account, please visit our website: www.kendrick-zale.com

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ABOUT KENDRICK ZALE

Due to the nature of our business and our varied range of financial products our employees are given market training from industry specialists. We are very confident that our team possesses the skill set and efficiency required servicing your account to complete satisfaction. As a client you will gain privileged access to our member only services.
To find out more about Kendrick Zale and Gold Investment opportunities, please visit www.kendrick-zale.com, or contact us:

Call us on 0845 004 2656. Registered address 70 St Mary Axe London EC3A 8BE Tel: 08450042656 General enquiries: info@kendrick-zale.com
SECURITY: Our clients have the peace of mind knowing that they are dealing with a company which adheres to strict compliance procedures. The products that we offer are either tangible or held in your very own holding account. We carry out regular in-house audit checks to ensure your records are kept up-to-date. We treat client data with the upmost confidentiality adhering to the Data Protection Act 1998. We do not sell your data or information to third parties. In the unlikely event that we went into liquidation our solicitors would act on behalf of our clients with records of our clients holding. This would be passed on to the liquidator so that it can be treated as separate property from the company.

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