BlackRock: Weekly gold report w/e 3rd February 2012
Gold prices closed the week up 2.0% at US$1,759/oz and in so doing registered their largest January gain (+9.9%) for 32 years. US dollar weakness and firmer investor demand drove the market. Gold shares managed to keep up with bullion prices, with the FTSE Gold Mines Index returning 2.2%. According to our now-familiar chart below, gold equities continue to trade at a discount to bullion and look like an interesting investment opportunity.
This feature was highlighted by one of the brokers this week. Bank of America Merrill Lynch (BAML) pointed out that the underperformance of equities began in May 2008. Since the onset of the Global Financial Crisis, bullion has outperformed equities by 58% (to the end of January this year). This is not an unprecedented situation for gold shares – they also underperformed significantly between 1996 and 2000 during the dotcom boom. Then – like now – few people believed that the trend could be reversed. However, the tech bubble was followed by a period of significant outperformance relative to bullion and BAML believes a similar story may well unfold.
“History doesn’t repeat itself, but it does rhyme” (Mark Twain).



Derek Bradley, CEO
Sarah Paul, Marketing Director
James Bradley, Head of e-Relationships
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