What Precious Metals Can Tell Us About Finance? Inaugural Lecture by Dr Brian Lucey

PRESENTATION HIGHLIGHTS

– Should I invest my fortune in gold?
– Lessons from gold and silver: Reviewing the research
– What precious metals can tell us about finance?
– What are precious metals and why should we care?
– What size of market and how evolved over time?
– Long and detailed history of gold and silver as money
– What does a tonne of gold look like?


– Research on precious metals including volatility and inflation
– Where produced and where demand from and how evolved and who studying precious metals
– Game of Thrones & Scrooge McDuck’s gold and the Hyperinflation of Smaug
– Gold and silver manipulation – “Was the fix a fix”?
– Gold a ‘permabubble’ or in correction?
– Gold costs $1,000/oz to mine so unlikely to fall below that level
– Drivers of retail coin and bar investment
– How does sentiment and mood affect precious metals?
– Why do central banks continue to buy and hold gold?
– Historical studies of precious metals
– How much to hold and when?
– Gold is proven safe haven – rises sharply when uncertainty and in economic crisis
Research says 10% a good allocation; 30% is high
– Silver similar – 1% to 5% and 10% allocation good in crisis
– One of Ireland’s great exporting services, small to medium size enterprise (SME) is here in the form of GoldCore and can help
– Do not spend too long staring at and obsessing about gold or might turn into Gollum
– Question and answer session


How the economics of gold and silver can help us understand the challenges facing financial economics and whether we should invest in gold and silver was explored in an inaugural lecture by Professor Brian Lucey, Professor of International Finance and Commodities in Trinity Business School.

In the lecture, entitled Golden Opportunities: What precious metals can tell us about finance, Professor Lucey examined the research space in the financial economics of precious metals.

“Precious metals, and gold in particular, are much more widely traded and invested in than might be thought. Total precious metals trading in 2015 was probably of the order of $30 trillion, nearly two years GDP for the whole of Europe.

Precious metals remain a very significant industrial and retail asset class, as well as financial. In 2016 probably 6,000 tons of precious metal was used in luxury goods, 2,400 tons of which was gold.”

Despite the size of the markets for various precious metals such as gold, silver, platinum and palladium, they remain under-researched and as a result can provide a good starting point for the testing of theoretical propositions.

Precious metals research wordcloud

“All the gold ever mined in history could be compressed into a 20m² cube and if you think of that in a stadium like Wimbledon you could fit it very comfortably. There has been about 180,000 tonnes of gold ever mined out, about $8 trillion worth.”

 

“The financial side, in other words the gold put aside for exchanges to back up gold products or to backup exchange traded funds or gold funds, is actually a pretty small amount of the entirety of the demand for gold. The vast majority of the demand for gold is from luxury goods and retail investment, which begs the question why is nobody looking in great detail at this.”

According to Professor Lucey, many of the traditional assumptions around financial economics may not hold when examining precious metal assets and as such many of these assets pose a challenge – being industrial, adornment, monetary, and financial assets all at once – as to how to deploy financial techniques to analyse.

Dr Brian Lucey is Professor of International Finance and Commodities in Trinity Business School, where he has worked since 1992.  Professor Lucey works mainly in the area of the financial economics of precious metals.

‘Golden Opportunities: What precious metals can tell us about finance’ is a fascinating must watch presentation and can be listened to and watched here

Mark O'Byrne

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