-- Posted Monday, 30 April 2012 | | Disqus

Global investors pulled the most out of stock funds in April since at least 1996 when records began. Equity funds posted net redemptions of $18.6 billion through to April 25th, according to data from EPFR Global.

The shift out of equities has been a long-term trend since the global financial crisis of 2008, despite the subsequent rally that took stocks above pre-crash levels. Mutual funds that buy US stocks suffered withdrawals of $121 billion in the year to end of March, reported Morningstar, while bond funds recieved $191 billion over the same period.

Bonds up

Indeed, it is to bond funds and cash deposits that investors are consigning their money. Precious metals have seen prices reach all-time highs in the past 12 months followed by a track sideways.

The question doubtless to be posed today at the Dubai Multicommodities Centre’s Precious Metals Conference is whether something is about to happen to restore investor enthusiasm for gold and silver as an investment class.

However, the consensus view at the moment is that near term declines in stock markets are likely, with the election of socialist French president one obvious catalyst. And when money comes out of stocks it generally flows into bonds and that strengthens the dollar and weakens the value of precious metals that are in anycase likely to be sold off to meet margin calls.

Bond crisis coming

Could anything be wrong with that view? Well it must be somewhat compromised by the problems in the eurozone bond markets where interest rates are rising and bond prices falling. If France looks like becoming the new Greece then there will be flight out of bonds, and into what?

US assets are one option but then the US presidential election is on the horizon and the good times cannot last for much longer. US bonds also look way overvalued and the exit of savers from US equities hardly shows much confidence in this asset class, with just the money printed by the Fed inflating prices.

Anybody must admit it is hard for stocks to rally when savers are dumping equities at the fastest in 17 years. So that would leave gold and silver as asset classes for wealth preservation in a larger eurozone sovereign bond crisis, and at the same time the Chinese middle class are also buying precious metals as protection from their rapidly imploding economy.

Investors sat on gold and silver should hold on, the good times for them could just be starting.

-- Posted Monday, 30 April 2012 | Digg This Article

About Peter Cooper:
Oxford University educated financial journalist Peter Cooper found himself made redundant by Emap plc in London in the mid-1990s and decided to rebuild his career in Dubai as launch editor of the pioneering magazine Gulf Business. He returned briefly to London in 1999 to complete his first book, a history of the Bovis construction group.

Then in 2000 he went back to Dubai to become an Internet entrepreneur, just as the dot-com market crashed. But he stumbled across the opportunity to become a partner in www.ameinfo.com, which later became the Middle East's leading English language business news website.

Over the course of the next seven years he had a ringside seat as editor-in-chief writing about the remarkable transformation of Dubai into a global business and financial hub city. At the same time www.ameinfo.com prospered and was sold in 2006 to Emap plc for $27 million, completing the career circle back to where it began a decade earlier.

He remains a lively commentator and columnist as a freelance journalist based in Dubai and travels extensively each summer with his wife Svetlana. His financial blog www.arabianmoney.net is attracting increasing attention with its focus on investment in gold and silver as a means of prospering during a time of great consumer price inflation and asset price deflation.

Order my book online from this link

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