Gold – Investor’s Haven
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