Spain: All Crisis, No Solutions for Savers

By: Adrian Ash | Fri, May 4, 2012
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For Spanish savers, the financial pages are all crisis, no solution...

Spain's financial crisis might be hardening the politics of capitalists vs. workers and the unemployed, but it's hardly benign for the first group.

The IBEX 35 stock market index has fallen very nearly to the 6-year low hit in March 2009, and closed Friday at levels first seen in 1997. Worse still, according to the Bank of Spain's latest Financial Stability Report...

Given this financial crisis, you might expect Spanish savers and investors to be choosing Gold Investment instead. "Years of low return on risk capital go with years of high returns on gold," as John Dizard of the Financial Times put it way back in 2007. And years of low returns is precisely what Spain's finance industry has been delivering since long before then.

Gold Chart
Larger Image - * Non-institutional, Spain-domiciled. Data from BullionVault and Morningstar.es

Yet the Spanish media's financial press, stuffed full of crisis headlines like everything else (including the sports pages after last week's dismal Champions League results), isn't pointing to possible escape routes. Indeed, the only news on gold - the classic escape from low interest rates and bank-credit risk - is that "the rush peaked last year" and interest is now waning.

"Gold has traditionally been a safe haven," says Expansion, "having a very low correlation or even negative correlation with risky assets, allowing investors to reduce the total risk of their portfolio. This feature attracted many investors [worldwide], anticipating declines in risky assets. But gradually the good performance of gold attracted more investors, who began to speculate in the metal."

Forecasting a "very common" event for gold today, Expansion sees later investors caught out as the market turns - a view which may well prove to be true. Who can say for sure right now? Any Spanish citizen buying gold in mid-2007, even as the financial crisis became plain to see, would now have 135% more in Euro terms, and after paying tax on their gains, too.

The crisis which drove them to buy has only got worse. The current lull in prices, and the current lull in global demand, doesn't square with the miserable facts or outlook for returns on risk capital either in Madrid or elsewhere.

 


 

Adrian Ash

Author: Adrian Ash

Adrian Ash
BullionVault.com

Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK's leading financial advisory for private investors, Adrian Ash is the head of research at BullionVault, where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.

About BullionVault

BullionVault is the secure, low-cost gold and silver exchange for private investors. It enables you to buy and sell professional-grade bullion at live prices online, storing your physical property in market-accredited, non-bank vaults in London, New York and Zurich.

By February 2011, less than six years after launch, more than 21,000 people from 97 countries used BullionVault, owning well over 21 tonnes of physical gold (US$940m) and 140 tonnes of physical silver (US$129m) as their outright property. There is no minimum investment and users can deal as little as one gram at a time. Each user's unique holding is proven, each day, by the public reconciliation of client property with formal bullion-market bar lists.

BullionVault is a full member of professional trade body the London Bullion Market Association (LBMA). Its innovative online platform was recognized in 2009 by the UK's prestigious Queen's Awards for Enterprise. In June 2010, the gold industry's key market-development body the World Gold Council (www.gold.org) joined with the internet and technology fund Augmentum Capital, which is backed by the London listed Rothschild Investment Trust (RIT Capital Partners), in making an $18.8 million (£12.5m) investment in the business.

For more information, visit http://www.bullionvault.com

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