"Gold is the best investment for pension funds"

Pension funds should invest up to 70% of their assets in gold or gold-related investments. invest. That's according to asset manager Christopher Wood of the leading Asian investment fund CLSA. According to the asset manager, the expansion of the ECB's stimulus program and the introduction of negative interest rates by the Bank of Japan show that central banks have become addicted to "unconventional monetary policy."

Now that central banks are pushing for negative interest rates to stimulate the economy, pension funds would be wise to set up 70% of their portfolios for a rise in the price of gold, according to Woods.

"Ultimately, this monetary policy will cause the collapse of the unbacked fiat money system," CLSA's asset manager warns. In his model portfolio, pension funds would invest half of their assets in Physical Gold, twenty percent in gold mining stocks and the remaining thirty percent in Asian stocks (excluding Japanese stocks).

'Rather gold than stocks'

Wood is not a fan of U.S. equities because, according to him, they are not attractively valued. The Dow Jones index is still at more than 17,000 points, which is less than 10% below its all-time high. This is despite the rally at the beginning of this year, the gold price is still 34% lower than the all-time high of $1,920 per troy ounce in 2011.

According to Wood, the Gold price in a bull market rise to $4,212 per troy ounce. There, he says, based on the reasoning, that per capita income in the U.S. has increased by 4.5% per year. If we take the old peak of $850 per troy ounce in January 1980 and adjust it for income growth, you end up with a price of $4,212 per troy ounce, according to the asset manager. That's the amount that equals the peak of the previous bull market in relation to income.

The price of gold has risen by 17% since the beginning of this year, while the GDX index of major gold mining stocks has risen by 45.6% since then.

Pension funds and gold

In the Netherlands, the Vereenigde Glasfabrieken pension fund was summoned by the Dutch Central Bank. In 2009, the fund had invested about 12% of its assets in physical gold, which was far too risky, according to the central bank. The fund then had to sell all the gold, while the price would continue to rise. In 2014, the Dutch Central Bank lost the lawsuit filed by the pension fund and had to €4.8 million compensation for lost returns.