ERSTE GROUP

Special Report Gold June 2010

Erste Group was founded in 1819 as the first Austrian savings bank….
Today Erste Group is one of the largest financial services providers in Central and Eastern Europe in terms of clients and total assets….

In GOLD we trust – June 2010….

…In the 1970s it was an unwritten law to invest at least a fifth of one’s portfolio in gold. In 1980, gold and gold mining shares accounted for 26% of global financial assets.
Today this number has fallen to 0.8%….

Expansive monetary policy and excessive debt Should guarantee a good environment for gold

The global race for monetary expansion should continue to prepare a fertile soil for gold investments. The reaction to the current crisis is already feeding into the next one. It is naïve to try to solve a crisis with the same means that caused it…This is why we think that gold, especially in the current fragile environment, represents an essential base element of any portfolio….

The following factors would also suggest a rising gold price:

Gold and precious metals are the only asset class that can sustainable stand its ground both in an inflationary and a deflationary scenario…
…the easily extractable reserves are already exhausted….
The asset class of commodities will attract more attention in the coming years….
…gold is perfect for diversification in a portfolio context….
…geopolitical risks argue in favour of gold investments….
…The heavily cited double-dip recession can definitely not be ruled out..
…The remonetisation of gold has started….

….Gold is the only asset that is not based on a contractual agreement between a creditor and a debtor. It is the only supranational, internationally accepted means of payment, and has survived every war and every national bankruptcy.

“If I told you I was going to give you a large steel box for your kids, and that box was not to be opened for 50 years, would you rather put three million in cash in that box or three million indiamonds or gold? Me, I’d rather pick the diamonds or the gold. Which would you choose?” Richard Russel

Definitely no bubble

Many market participants find it apparently difficult to distinguish between a bull market and a bubble…If one were to cover the MZM supply, the gold price would have to increase to about USD 10,000. If the central bank wanted to cover the money supply M2 with gold, the gold price would have to increase to almost USD 30,000/ounce.

…The risk/return profile of gold investments remains excellent…

…Every trend ends in euphoria and excess.

…Our next 12-month target is USD 1,600. We expect the parabolic trend phase to still be ahead of us. At the end of this cycle the price should reach our target of USD 2,300… Read full article here.

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