Today’s Money Weekend will embark on a journey into Asia. First stop is to where the world’s money is heading at a faster and faster rate: Singapore.
Bloomberg revealed this week that ANZ is opening a gold vault in the island city to tap further into the market for physical storage. The Singapore vault can hold a cool 50 metric tons, or a couple of billions worth at today’s prices. ANZ already has other vaults in Hong Kong, Zurich and Perth.
Considering gold has had its worse year in over a decade, a move like that now looks telling. But there’s more to this story than precious metals…
Digging and Dealing in the West
ANZ, for one, is bullish on the gold price over the next two years. Of course, for every bank like ANZ that thinks the gold price is going higher, there’s another one that thinks it’s going lower. Case in point is Goldman Sachs, which Bloomberg cites as predicting gold futures at $1,050 an ounce by the end of next year.
That seems to be more in tune with sentiment than against, if the annual Diggers and Dealers conference held in Western Australia is anything to go by. According to reports, there’s to be 400 less attendees than last year and the first time numbers have fallen in six years.
But maybe ANZ has its finger on the pulse of the gold market more than we’d previously considered.
Check this out from the article:
‘Demand for physical metal is robust, irrespective of prices, said Listorti, whose team distributes about 15 percent of the world’s primary gold production. Clients include central banks, sovereign wealth funds and asset managers, he said. The company has a supply agreement with the Perth Mint and is one of the top three providers of gold into China, according to a statement.’
In fact, ANZ seems to be more bullish on the resource sector as a whole than you might expect. Take the fact that ANZ CEO Mike Smith relocated senior executive Cathryn Carver from Hong Kong to Perth before the big downturn in commodities. Here’s the news: she’s not going anywhere.
She’s staying put under the assumption Australia has entered a ‘new normal’ that kind of looks a lot like the old normal: a growing Asia that needs resources. It’s more a case of things being off the boil than being over for good.
Money talks the most, as they say, and Ms Carver is hiring and looking to fund the right project. Here’s the catch: it better be good: ‘For the juniors it is always going to be hard because they are smaller and in this environment that we are in today it is just tougher. But if you have a humdinger of a project I think you can get the money…I’ll probably get a lot of calls now.’
That sounds a lot like our own Kris Sayce’s position at Australian Small-Cap Investigator. He thinks the cycle is turning back in the favour of mining stocks. His latest three mining plays are up around 42%, 13% and 2% for now. The early stages of the new financial year suggest he might be on to something: the material sector was up 9% in July, the best performing sector.
Does this signal ANZ is on the right track?
The Rise and Rise of the East
Maybe. It does agree with ANZ’s stated business focus of diversifying into Asia. It’s been that way for a while now and the company clearly intends to stick with it. And no wonder. That’s where the money’s growing, and increasingly, staying.
The Australian Financial Review reported last week that Singapore’s assets under management rose 22% in 2012 to $US1290 billion. It’s not quite Switzerland, but it’s getting closer. Boston Consulting Group says private wealth in Asia (ex-Japan) rose 13.8 per cent last year, just under double North America.
The key point is this: ‘Asia was the biggest destination for investments from funds handled out of Singapore.’
Where capital goes, growth will follow. If you’re on the hunt for growth, follow the money. If Singapore and Hong Kong continue to take market share as wealth management hubs from Switzerland and London, there will be a huge pool of money that can finance the growing economies of Asia. We’re not just talking about the big boy China, but the smaller, periphery countries.
This is a trend Nick Hubble, over at the Money for Life Letter, hasfound two ways to capitalise on. The first you can read about here.
The second has a lot to do with this image:
Source: The Money For Life Letter
Nick says more people live inside this small circle around South East Asia than outside it. That’s a lot of people. But you need more than just people. What’s needed is to throw a 798 year old idea into the mix. But we’ll let him tell it in his latest issue if you’re interested.
Until next week!
Callum Newman+
Editor, Money Weekend
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