Demand for gold in UK can rise because of pension funds

May 3rd, 2014 by

British demand for gold will get a boost when gold is added to the list as a potential asset for pension funds. According to the bullion dealer Goldcore Ltd. the Financial Conduct Authority ( FCA ) is considering to allow gold on the asset list for retirement investments.

Gold as a mainstream asset

The decision on the possible inclusion of additional assets of the FCA will be taken in late June of this year. According to Mark O’Byrne, director of Gold Gore , the possible permission will lead to increased demand for gold and gold will be on the radar of more investors. Gold Core manages more than $ 200 million invested assets in precious metals, according to Bloomberg. O’Byrne indicated in a telephone response to Bloomberg that “if that happened, it would contribute to gold being seen almost as a mainstream asset”.

Gold as part of pension

Since 2006, gold is permitted to self invested pensions. According O’byrne gold is currently a niche investment because few people are aware that physical gold can form a part of a pension fund. Gold Core indicates current allocations to bullion are very low, with 5.2% of GoldCore’s clients having gold in their pension funds. In 1980 about 20% investment funds were allocated to gold, according O’byrne. This proportion has since declined sharply back. Currently the figure is around 2 to 3 %. According O’byrne this gives scope for a significant increase in demand for gold.

Gold & Pension Fund in the Netherlands

Pension fund of the United Glasfabrieken in the Netherlands bought physical gold as asset to their investments. In 2011 about 13 % of the value of this fund was allocated to gold. In 2008 the pension fund bought physical gold from the Perth Mint . The following year, a second purchase was made. The Dutch Central Bank (DNB), forced the fund to reduce the 13% back to 3%. The central bank was convinced that a 13% stake in gold was to risky. The reduction of the position and the rise in the goldprice that year resulted in a potential loss of €10 million. There was a legal case filed by the pension fund and the Court of Rotterdam ruled that eventually DNB lost the case. DNB didn’t specify why a allocation of 3% was justified and a allocation of 13% is not.

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