Panicky investors may rush to gold for cover


With the risk appetite in the global financial markets taking a major hit following the UK’s vote to exit the European Union, gold as an asset class is expected to outperform others in the near term.

According to experts, gold has once again regained its appeal as a safe haven asset due to uncertainty in the global financial markets.

“Given the large uncertainties, an allocation to gold becomes extremely important,” said Chirag Mehta, senior fund manager, alternative investments, Quantum AMC.

On Friday, risk assets across the globe were battered badly while the yellow metal and US dollar rallied higher as risk averse investors sought the safety of US treasury bonds and gold.

According to World Gold Council, the latest developments could see an entirely new class of gold investors emerging at the global level. Cent-ral bank actions will also increase the attractiveness of gold as compared to other safe haven assets.

During the European sovereign debt crisis, gold rose by 12 per cent as fears of a widespread meltdown increased. “Today’s risks are arguably greater. There is a reason why the world’s central banks hold so much of their national wealth in gold,” WGC added.

Saurabh Gadgil, vice-president, Indian Bull-ion Jewellers Associ-ation (IBJA) and chairman and managing director of PNG Jewellers believes that gold would hit Rs 36,000 per 10 grams by the end of this year.

“Already there are expectations regarding gold touching $1,400- $1,500 per ounce in the international market. The euro and British pound are expected to remain under pressure in the foreseeable future.  Institutional investors across the globe are expected to turn towards gold in uncertain times. With dollar rising, the rupee is also expected to weaken in coming mon-ths which would push the prices of domestic gold even higher,” he said and added that the rally in gold prices would be driven more by demand for gold coins and bars. “Investors will pull their money from the stock markets seeking safe-haven assets like gold,” he said.

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