UBS: Chinese gold demand to taper in 2014 • 3:09 PM
• "The current mood in China is certainly different to what it was earlier this year," says UBS upon returning from a fact-finding mission to the country to gauge gold demand. "The vast majority is not counting on the same level of appetite (for gold) as seen this year."
• Part of the reason is an early Chinese New Year - meaning importers didn't wait for the calendar to turn before bringing in needed supply. But also there's classic deflationary pressure as buyers - used to recent price ranges - sit on their hands until a breakout to the downside occurs.
• Separately, Axel Merk runs the numbers on the performance of a 70/30 portfolio - 70% in the S&P 500 and 30% in gold. Since 1971, it would have earned 9.8% annually, but with less volatility than owning the S&P alone (which rose an annualized 10.1%). By itself, gold gained 8.6% on an annualized basis.
• "The takeaway should be that diversification with uncorrelated assets matters, as it is possible to substantially lower the volatility of a portfolio by adding an uncorrelated asset. That applies despite the fact that gold was more volatile than the S&P 500 since 1971," says Merk.
• Precious metals are having a big session, gold +2.1% to $1,260 and silver +3% to $20.30.