“Allianz Global” on why recovery could be a double-edged sword.

“Allianz Global” believes that the fragile recovery in the global economy means that there will be a significant lag between an increase in demand for oil and a corresponding increase in its supply.

With China recently becoming the largest auto market in the world and other emerging economies placing increasing pressure on supply, “Allianz Global” believes that double-digit oil prices will be a thing of the past by 2011.

Sources close to the Italy-based investment house have expressed concern that the rising price of oil could increase inflationary pressures in economies with weakening currencies at a time when their fragile recoveries can least accommodate higher interest rates to combat rising prices.

While the US Federal Reserve maintains its zero interest rate policy, other countries are forced to pay more to import oil as its price rises in dollar terms and this could derail the recovery.

“Allianz Global” analysts have reiterated their recommendation to clients to gain exposure to the bull market in crude oil by acquiring stock in oil explorers and producers which stand to do well from the increased price in the years going forward.

Allianz Global on why the BoE may not be done with quantitative easing!

Italy-based boutique brokerage, Allianz Global, is apparently skeptical of the motivations for the decision this week by the bank of England to pause its controversial program of quantitative easing.

Analysts at the firm belief that the Monetary Policy Committee bowed to pressure from the British Prime Minister, Gordon Brown, who is facing mounting concern over the size of Britain’s public sector debt.

Britain recently emerged from its longest recession since World War II by posting 0.1% growth in the final quarter of 2009.

Allianz Global apparently believes that the recovery in Europe’s second-biggest economy is so weak that the Bank of England will be forced to restart its quantitative easing program once it becomes clear that the UK economy is unable to continue growing one without support from the government.

Allianz Global sources suggest, however, that the central bank may face resistance in light of mounting concerns over the problems of sovereign debt in the euro zone. Greece has recently been subjected to intense speculation that it would default on its sovereign debt obligations unless it receives a bailout from stronger economies within the European Union.

Allianz Global sources suggest that, although the United Kingdom has its own currency, the ability to inflate it at will is unlikely to be of benefit once markets lose confidence in the ability of the government to manage its debt.

“Allianz Global”: Deep cuts in public spending and sharp tax hikes are on the way in Britain.

ROME, Italy – Allianz Global: While the eyes of the financial world are firmly trained on events in Greece and its potential knock-on effects on the Eurozone, analysts at Italy-based investment boutique, “Allianz Global” are paying more attention to the plight of the United Kingdom.

Britain’s consumers are the most indebted in the developed world and the country has spent more than any other on bailing out its banking sector. As a result of the billions being spent by the government, the country has been warned by both Moody’s and Standard & Poor’s that it must table credible plans to reduce its huge deficit or suffer the ignominy of losing its AAA sovereign credit rating.

Sources close to “Allianz Global” believes that the winner of the forthcoming general election will not be able to reduce public spending or hike taxes to the degree required to satisfy the financial markets.

Aside from the financial market aspects, “Allianz Global” have warned clients expecting a rebound in the property market to lower their expectations citing the very real possibility of interest rate hikes being forced on the country by bond market investors demanding higher yields in return for the additional risk of holding UK gilts.

The firm is also skeptical of the argument that a weaker pound helps the country’s exports citing the woeful 4^th quarter GDP number which showed the economy grew by only 0.1% despite a pound that has lost significant ground against both the dollar and the euro since the financial crisis began in 2007.

“Allianz Global” reminded clients to liquidate sterling-denominated assets and to hold precious metals or commodity currencies instead.

“Allianz Global” believes that inflation is the most likely outcome of the “cure” meted out by central banks.

Allianz Global, the Italy-based asset management firm, remains convinced that the specter of inflation poses the greatest risk to investor wealth in the next few years.

Analysts at the firm reiterated their advice to acquire and hold the precious metal as a way of countering the inflation that it says is inevitable given the likelihood that governments around the world will continue to pursue inflationary policies in an effort to reduce the real value of their debts.

A source close to “Allianz Global” said that the unprecedented levels of bond issuance by developed nations is placing extremely high pressures on their ability to service their debt payments in the years going forward as tax revenues fall. The firm believes that there are two choices: the first is for nations to default on their debt whilst the second is for them to inflate their way out of trouble by paying their debts off with a devalued currency.

This will seriously affect the purchasing power of investors’ and savers’ money.

“Allianz Global” have long been bullish on gold citing its credentials as a hedge against government profligacy rather than inflation per se. The firm points to the price of gold in pounds sterling which has increased from just £375 per ounce in the 3^rd quarter of 2007 to over £700 in the 3^rd quarter of 2009 as a real world example.

“Allianz Global” routinely advises clients to purchase gold through ETFs (Exchange Traded Funds) to avoid having to take actual delivery and organize storage of their gold.