Everlasting Lure For Gold

In the face of prevalent political and economic uncertainties across the universe, particularly in major developed countries such as the United States and the United Kingdom, the allure of gold as the safe haven stock to hold and the appetite for amassing it has seldom been so sharply focused as in today’s troubled times. With the ongoing global trade war between the fading and fast emerging super-powers such as America and China making little progress, how can the rest of the world remain calm? The latest report of the World Gold Council (WGC) makes quite a revealing study about how countries prefer to place their faith in the yellow metal which was derided as “the relic of a barbaric era” by the renowned economist Keynes.

That both nations and the constituents (people) opt to have their safe bets latched on to bullion is demonstrated by the fact that retail investment in coin was mostly made by individuals as a safety measure against turbulent times. It zoomed to touch a five-year pinnacle in 2018 of 236.4 tonnes and demand for gold bars held steady at 781.6 tonnes. Interestingly, even central banks added a hefty 651.5 tonnes to official gold reserves in 2018, the second highest yearly total on record. Global gold mine production too inched up to a new record high of 3,347 tonnes last year, bolstered by a healthy production pipeline.

Net purchases jumped to their peak since the end of US dollar convertibility into gold in 1971 as the swathe of central banks turned to gold as a relieving diversifier from risks than any other form of investments including currencies! This is predicated on the palpable fear that there might be greater currency volatility, given the taut geopolitical situation and trade tensions among major powers with each slapping trade retaliatory tariffs and erecting formal and informal barriers across the free movement of goods.

The added apprehension is that with the mighty US dollar being likely to be buffeted by the unpredictable policy gyrations of the US and the anemic economic recovery in most of Europe, given the lacklustre performance and clash-ridden situation such as in Britain over Brexit or in France over popular uprisings against Macron’s economic policies, the holding of bullion looks attractive as its returns in local currency terms are quite mouth-watering.

Courtesy: DNA