Arguably the biggest shock of this turbulent year for investors is that the gold price is not going through the roof.
After surging to $2,052 an ounce on March 8, it has slumped to about $1,850 at the time of writing ― a drop of 9.8 per cent.
Gold is in correction territory, which is odd, given that for thousands of years it has been seen as a safe haven in times of trouble, and these are undoubtedly troubled times.
Most investment experts say every portfolio needs a sprinkling of gold dust to hedge against riskier assets such as shares. When stock markets lose their lustre, gold usually glitters. But not this year.
Gold is often seen as an inflation hedge, too, but rocketing consumer price growth hasn’t lifted it.
Does gold no longer work?
Gold is often seen as an inflation hedge, too, and investors certainly need one of those right now, with shares falling everywhere and New York’s Nasdaq tech index down more than a quarter.
Does gold no longer work?
At times like these, gold should be doing what everybody expects — to shine and do so brightly, says Fawad Razaqzada, market analyst at City Index and Forex.com. “Until now, the metal has been unable to find much demand either from inflation hedging or the flight from riskier stock markets.”
Two factors have held it back. First, gold pays no interest, so holding it looks less attractive as bond yields rise.
So far this year, yields on 10-year US government bonds have climbed from 1.5 per cent to about 2.75 per cent, so the opportunity cost of holding gold (in terms of lost interest) has climbed.
“This makes gold less appealing for income seekers,” Mr Razaqzada says.
The second factor is the US dollar. As the world’s reserve currency, it has proved a more reliable store of value than gold.
So far this year, the greenback is up 10.27 per cent against the Japanese yen (another supposed safe haven), 5.82 per cent against the euro and 5.17 per cent against the Swiss franc (also a safe haven).
Gold is priced in US dollars and this makes it more expensive for international investors buying it using other currencies, which is squeezing demand.
Yet, Mr Razaqzada lists five reasons why the yellow metal has a brighter outlook.
First, bond yields have dropped sharply as investors pile back into the perceived safety of US Treasuries, reducing the opportunity cost of holding gold.
Second, shares and cryptocurrencies have slumped as economic uncertainty rises, increasing gold’s safe-haven attraction. Third, the US dollar became too strong and may have peaked, falling 2 per cent against the yen and euro in the past month alone. This makes gold cheaper for non-dollar buyers.
Fourth, the gold price is relatively inexpensive after recent weakness. Finally, inflation is rocketing and gold offers a way of hedging against that.
“If gold was ever going to rise, you would feel now would be the time,” Mr Razaqzada says.
However, he adds a note of caution. “Given gold’s recent behaviour, it is perhaps better to wait for the metal to show a strong recovery signal before piling in.”
UAE and India gold trade pact takes effect - in pictures
Risks remain as gold continues to fall whenever the US dollar or US shares recover their mojo, Vijay Valecha, chief investment officer at Century Financial, says.
“Yet the precious metal’s downside appears limited as it is supported by disappointing US economic data,” he adds.
As markets price in an increased probability of a global recession, the US Federal Reserve may slow the rate of interest hikes, hitting bond yields, Mr Valecha says.
“This should support the yellow metal as the two are negatively correlated. If bond yields rise, the gold price falls, and vice versa.”
As with other asset classes right now, gold bugs are waiting to see how the Fed will move. Yet other analysts see a clearer upwards path from here.
Gold’s role as a portfolio diversifier is more important than ever as war in Ukraine drags on and economic and political volatility grow, says Paul Jackson, Invesco’s global head of asset allocation research.
“Historically, we have considered the best environment for gold to be a US recession, as that would reduce real bond yields and weaken the dollar. Our model suggests that such an outcome could push gold above $2,000 and probably higher if the Russia-Ukraine risk premium remains,” he says.
By contrast, suggestions that Bitcoin and cryptocurrencies are now “digital gold”, a store of value in times of trouble, are wide of the mark, Mr Jackson argues.
Bitcoin is simply too volatile, almost halving from $67,734 to $35,364 in the two months to January 23, 2022. Cryptocurrencies behave like stock markets, only with greater volatility.
The cryptocurrency crash has all the hallmarks of a classic bank run, Jason Cozens, founder of gold platform Glint, says.
“People lose confidence in their ability to recover funds, selling happens and everyone runs for the exit,” he adds.
The digital gold theory does not stand up to scrutiny, Mr Cozens says.
“In times of inflation and global uncertainty, gold still provides the safest haven for savings.”
Its long-term performance justifies investor faith. “The last 50 years have seen fiat currencies lose 80 per cent to 85 per cent of their value. In the same period, the value of gold has increased five-fold.”
Gold’s role as portfolio diversifier is now more important than ever as war in Ukraine drags on and economic and political volatility grow
Paul Jackson,
Invesco’s global head of asset allocation research
Gold is due for a comeback, says Chris Beauchamp, chief market analyst at online trading platform IG.
“Gold bugs will have been waiting for their moment and will be pleased to see the metal has finally woken up," he says.
“Some overdue USD weakness is going to help and, as everyone worries about a US recession and high inflation, gold might finally have a chance at recouping some of the losses seen since April 1.”
As a rule of thumb, gold should make up 5 per cent to 10 per cent of the typical portfolio, at most. So check what exposure you have before buying and don’t expect to bank a quick profit. Future movements of any asset class are impossible to predict with any consistency.
However, if your portfolio is low on gold, now could be a good time to buy with a long-term view.
The easiest and cheapest way to get exposure is through an ETF such as the SPDR Gold Shares ETF or iShares Gold Trust ETF.
Gold will not always shine, but it is worth buying and holding because it tends to do well just when you need it most.
UPI facts
More than 2.2 million Indian tourists arrived in UAE in 2023
More than 3.5 million Indians reside in UAE
Indian tourists can make purchases in UAE using rupee accounts in India through QR-code-based UPI real-time payment systems
Indian residents in UAE can use their non-resident NRO and NRE accounts held in Indian banks linked to a UAE mobile number for UPI transactions
UAE%20Warriors%2045%20Results
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Like a Fading Shadow
Antonio Muñoz Molina
Translated from the Spanish by Camilo A. Ramirez
Tuskar Rock Press (pp. 310)
Specs
Engine: Duel electric motors
Power: 659hp
Torque: 1075Nm
On sale: Available for pre-order now
Price: On request
GAC GS8 Specs
Engine: 2.0-litre 4cyl turbo
Power: 248hp at 5,200rpm
Torque: 400Nm at 1,750-4,000rpm
Transmission: 8-speed auto
Fuel consumption: 9.1L/100km
On sale: Now
Price: From Dh149,900
FROM%20THE%20ASHES
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MATCH INFO
Uefa Champions League quarter-final, second leg (first-leg score)
Porto (0) v Liverpool (2), Wednesday, 11pm UAE
Match is on BeIN Sports
Springsteen: Deliver Me from Nowhere
Director: Scott Cooper
Starring: Jeremy Allen White, Odessa Young, Jeremy Strong
Rating: 4/5
Pros%20and%20cons%20of%20BNPL
%3Cp%3E%3Cstrong%3EPros%3C%2Fstrong%3E%0D%3C%2Fp%3E%0A%3Cul%3E%0A%3Cli%3EEasy%20to%20use%20and%20require%20less%20rigorous%20credit%20checks%20than%20traditional%20credit%20options%0D%3C%2Fli%3E%0A%3Cli%3EOffers%20the%20ability%20to%20spread%20the%20cost%20of%20purchases%20over%20time%2C%20often%20interest-free%0D%3C%2Fli%3E%0A%3Cli%3EConvenient%20and%20can%20be%20integrated%20directly%20into%20the%20checkout%20process%2C%20useful%20for%20online%20shopping%0D%3C%2Fli%3E%0A%3Cli%3EHelps%20facilitate%20cash%20flow%20planning%20when%20used%20wisely%0D%3C%2Fli%3E%0A%3C%2Ful%3E%0A%3Cp%3E%3Cstrong%3ECons%3C%2Fstrong%3E%3C%2Fp%3E%0A%3Cul%3E%0A%3Cli%3EThe%20ease%20of%20making%20purchases%20can%20lead%20to%20overspending%20and%20accumulation%20of%20debt%0D%3C%2Fli%3E%0A%3Cli%3EMissing%20payments%20can%20result%20in%20hefty%20fees%20and%2C%20in%20some%20cases%2C%20high%20interest%20rates%20after%20an%20initial%20interest-free%20period%0D%3C%2Fli%3E%0A%3Cli%3EFailure%20to%20make%20payments%20can%20impact%20credit%20score%20negatively%0D%3C%2Fli%3E%0A%3Cli%3ERefunds%20can%20be%20complicated%20and%20delayed%0D%3C%2Fli%3E%0A%3C%2Ful%3E%0A%3Cp%3E%3Cem%3ECourtesy%3A%20Carol%20Glynn%3C%2Fem%3E%3C%2Fp%3E%0A
Rashid & Rajab
Director: Mohammed Saeed Harib
Stars: Shadi Alfons, Marwan Abdullah, Doaa Mostafa Ragab
Two stars out of five
What is an ETF?
An exchange traded fund is a type of investment fund that can be traded quickly and easily, just like stocks and shares. They come with no upfront costs aside from your brokerage's dealing charges and annual fees, which are far lower than on traditional mutual investment funds. Charges are as low as 0.03 per cent on one of the very cheapest (and most popular), Vanguard S&P 500 ETF, with the maximum around 0.75 per cent.
There is no fund manager deciding which stocks and other assets to invest in, instead they passively track their chosen index, country, region or commodity, regardless of whether it goes up or down.
The first ETF was launched as recently as 1993, but the sector boasted $5.78 billion in assets under management at the end of September as inflows hit record highs, according to the latest figures from ETFGI, a leading independent research and consultancy firm.
There are thousands to choose from, with the five largest providers BlackRock’s iShares, Vanguard, State Street Global Advisers, Deutsche Bank X-trackers and Invesco PowerShares.
While the best-known track major indices such as MSCI World, the S&P 500 and FTSE 100, you can also invest in specific countries or regions, large, medium or small companies, government bonds, gold, crude oil, cocoa, water, carbon, cattle, corn futures, currency shifts or even a stock market crash.
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The specs
Engine: 2.9-litre, V6 twin-turbo
Transmission: seven-speed PDK dual clutch automatic
Power: 375bhp
Torque: 520Nm
Price: Dh332,800
On sale: now
So what is Spicy Chickenjoy?
Just as McDonald’s has the Big Mac, Jollibee has Spicy Chickenjoy – a piece of fried chicken that’s crispy and spicy on the outside and comes with a side of spaghetti, all covered in tomato sauce and topped with sausage slices and ground beef. It sounds like a recipe that a child would come up with, but perhaps that’s the point – a flavourbomb combination of cheap comfort foods. Chickenjoy is Jollibee’s best-selling product in every country in which it has a presence.
Opening Premier League fixtures, August 14
- Brentford v Arsenal
- Burnley v Brighton
- Chelsea v Crystal Palace
- Everton v Southampton
- Leicester City v Wolves
- Manchester United v Leeds United
- Newcastle United v West Ham United
- Norwich City v Liverpool
- Tottenham v Manchester City
- Watford v Aston Villa
Indoor cricket in a nutshell
Indoor Cricket World Cup – Sep 16-20, Insportz, Dubai
16 Indoor cricket matches are 16 overs per side
8 There are eight players per team
9 There have been nine Indoor Cricket World Cups for men. Australia have won every one.
5 Five runs are deducted from the score when a wickets falls
4 Batsmen bat in pairs, facing four overs per partnership
Scoring In indoor cricket, runs are scored by way of both physical and bonus runs. Physical runs are scored by both batsmen completing a run from one crease to the other. Bonus runs are scored when the ball hits a net in different zones, but only when at least one physical run is score.
Zones
A Front net, behind the striker and wicketkeeper: 0 runs
B Side nets, between the striker and halfway down the pitch: 1 run
C Side nets between halfway and the bowlers end: 2 runs
D Back net: 4 runs on the bounce, 6 runs on the full
Jetour T1 specs
Engine: 2-litre turbocharged
Power: 254hp
Torque: 390Nm
Price: From Dh126,000
Available: Now
if you go
The flights
Flydubai offers three daily direct flights to Sarajevo and, from June, a daily flight from Thessaloniki from Dubai. A return flight costs from Dhs1,905 including taxes.
The trip
The Travel Scientists are the organisers of the Balkan Ride and several other rallies around the world. The 2018 running of this particular adventure will take place from August 3-11, once again starting in Sarajevo and ending a week later in Thessaloniki. If you’re driving your own vehicle, then entry start from €880 (Dhs 3,900) per person including all accommodation along the route. Contact the Travel Scientists if you wish to hire one of their vehicles.
hall of shame
SUNDERLAND 2002-03
No one has ended a Premier League season quite like Sunderland. They lost each of their final 15 games, taking no points after January. They ended up with 19 in total, sacking managers Peter Reid and Howard Wilkinson and losing 3-1 to Charlton when they scored three own goals in eight minutes.
SUNDERLAND 2005-06
Until Derby came along, Sunderland’s total of 15 points was the Premier League’s record low. They made it until May and their final home game before winning at the Stadium of Light while they lost a joint record 29 of their 38 league games.
HUDDERSFIELD 2018-19
Joined Derby as the only team to be relegated in March. No striker scored until January, while only two players got more assists than goalkeeper Jonas Lossl. The mid-season appointment Jan Siewert was to end his time as Huddersfield manager with a 5.3 per cent win rate.
ASTON VILLA 2015-16
Perhaps the most inexplicably bad season, considering they signed Idrissa Gueye and Adama Traore and still only got 17 points. Villa won their first league game, but none of the next 19. They ended an abominable campaign by taking one point from the last 39 available.
FULHAM 2018-19
Terrible in different ways. Fulham’s total of 26 points is not among the lowest ever but they contrived to get relegated after spending over £100 million (Dh457m) in the transfer market. Much of it went on defenders but they only kept two clean sheets in their first 33 games.
LA LIGA: Sporting Gijon, 13 points in 1997-98.
BUNDESLIGA: Tasmania Berlin, 10 points in 1965-66
