Gold – In­vestor’s Haven

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The re-emer­gence of gold as a metal of in­trin­sic value af­ter the fi­nan­cial cri­sis and re­ces­sion of 2008 has not faded since then. The global sce­nario ap­pears busy with con­tin­u­ally ris­ing costs of the yel­low metal. The forces re­spon­si­ble for this are mainly the big buy­ing trans­ac­tions by the cen­tral banks of Rus­sia, China, Brazil and In­dia among oth­ers, the rush of in­sti­tu­tional and high net worth in­di­vid­ual in­vestors and a de­mand surge in the neo-rich economies of China and In­dia, as well as by mil­lion­aires from the Mid­dle East.

Gold is also be­ing treated as a trusted hedg­ing tool to hedge against the re­tard­ing economies of the US and Europe and high in­fla­tion in Asian economies. This ten­dency has in­creased the price of gold to more than dou­ble in less than three years, from $870 an ounce at the end of 2008 to $1,820 an ounce cur­rently.

In 2010, the mar­ket wit­nessed an al­most 42 per­cent re­turn on in­vest­ment in pre­cious me­tals which have proved to be the best per­form­ing as­sets for the sec­ond year run­ning and also for the fourth time in the last five years. Ac­cord­ing to Shafi Choksi, Di­rec­tor Pak­istan Gems and Jew­ellery De­vel­op­ment Com­pany (PJGDC), “Com­par­ing 2009, the num­ber of in­vestors and in­vest­ment in gold re­mained on the higher side as the yel­low metal has al­ways been con­sid­ered a safe haven for in­vestors in terms of safer in­vest­ment all over the world.”

As aware­ness about pre­cious com­modi­ties as an as­set grows in Pak­istan, the dou­ble num­ber of in­vestors can trans­late gold as the lead­ing in­vest­ment com­mod­ity in the world. Over the last one year, gold prices in In­dia have risen by 35 per cent and in Pak­istan by 48 per cent. This is be­cause the cur­rent poor out­look for the global economies, the ris­ing in­fla­tion­ary pres­sures and the weak­ness of the US dol­lar against global cur­ren­cies, may take the gold price to $2,000 per ounce on in­ter­na­tional de­mand by the end of 2011. Im­por­tantly, gold is in­versely af­fected by the de­val­u­a­tion of the dol­lar which means the in­vestors who have lost con­fi­dence in the bourses across the ma­jor stock ex­changes amid the debt cri­sis, have in­creas­ingly found gold as the safest haven for in­vest­ment.

In­vestors in Pak­istan are also di­ver­si­fy­ing their in­vest­ment into gold, be­cause such in­vest­ments typ­i­cally have had an in­verse re­la­tion­ship with stock mar­ket move­ments. Tech­nol­ogy has changed the environment in which there are very few ob­sta­cles to­day to stop in­vestors from buy­ing or sell­ing as­sets any­where in the world. Ex­perts be­lieve there are no signs of any im­me­di­ate re­vival in the world’s largest economies, so the ‘out­look for the yel­low metal’ is bright. How­ever, in­vestors will again pre­fer gold for the store of value against a plung­ing loss of pur­chas­ing stocks.

There are a num­ber of ways in which one can in­vest in gold. The gold bar is a tra­di­tional tool for deal­ings in trade and in­vest­ment. The use of coins is de­pen­dent on the weight of gold. In­vestors also opt for ac­counts, where Swiss banks pro­vide a gold ac­count op­tion for gold-based trans­ac­tions. More­over, Gold Ex­change Trade Funds as­sist in trans­ac­tions through stock ex­changes. There is also an in­vest­ment op­tion in min­ing com­pa­nies, where in­stead of stock ex­change, in­vestors deal with shares of these com­pa­nies

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