Gold: To invest, or not to invest?

Gold: To invest, or not to invest?
An employee shows gold bullions at Degussa shop in Singapore June 16, 2017. (Reuters)
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Updated 24 December 2020

Gold: To invest, or not to invest?

Gold: To invest, or not to invest?
  • Ultimate safe-haven asset had record highs this year 

RIYADH: The coronavirus pandemic has had a brutal impact on the world’s economy, but it hasn’t all been bad news. 

Gold bullion, the world’s go-to commodity in times of crisis, was up around 24 percent this year and is set for its biggest annual gain since 2010.

What is this precious metal’s big attraction? It benefits from diverse sources of demand - as an investment, reserve asset, a luxury commodity and a technology component - according to the World Gold Council. It is highly liquid, nobody’s liability and carries no credit risk. Furthermore it is scarce, historically proving to preserve its value over time.

Gold can enhance any investment portfolio in four key ways. It generates long-term returns, acts as a diversifier and mitigates losses in times of market stress, provides liquidity with no credit risk and, finally, improves overall portfolio performance.

The price of gold hit a record high in August, when it reached $2,075 an ounce. On Thursday, spot gold was up 0.3 percent to $1,877.43 per ounce, while US gold futures were up 0.3 percent to $1,882.90.

“A combination of a weaker dollar, negative real rates and low yields along with uncertainties around the new strain of coronavirus is helping gold at the moment,” UBS analyst Giovanni Staunovo told Reuters.

The question that analysts are asking is if gold, which is the ultimate safe-haven play, can provide investors with a return in 2021.

Mazen Al-Sudairi, head of research at Riyadh-based financial services company Al Rajhi Capital, said that global consumption of gold had “plateaued” at 4,500 tons for the last decade, which accounted for the upward movement of the price of gold since March.

“Gold prices have dropped from August’s record high … as economies are starting to recover,” he told Arab News.

He also said the risks of excess currency printed by central banks across the world could improve the investment case for gold, once the current declining trend in gold prices came to a halt and changed direction.

“Rising inflation and a low interest rate environment would also support gold prices.” 

A report from Barclays Private Bank said that while gold was unlikely to drive long-term growth, it remained a “powerful diversification tool” and was a good way “to preserve wealth during periods of turbulence.”

Vijay Valecha, chief investment officer at Dubai-based Century Financial, said that while gold prices had surged sharply in 2020, at the moment they were still more than 10 percent off the record high seen in August.

“Demand for the safe-haven metal dwindled on hopes of economic recovery following a string of positive vaccine developments. Nonetheless, the long-run fundamentals still favor the bullion as leading central banks continue to offer support for economies.”

He also said that the market’s focus on a return of inflation in 2021 had helped “put a floor” under gold prices, and that the US 10-year inflation break-evens were above their pre-pandemic levels.

“With the Fed signaling near zero interest rates till 2023, inflation should rise at a faster pace than US bond yields, which means the US real-yields are likely to remain well below 0.0 percent. This subdued real rate environment will buoy the attractiveness of gold as an alternative investment to fixed income.” 

He added that vaccine-related optimism, Joe Biden’s election victory, a coronavirus relief package from the US and the Fed’s commitment to maintain its unprecedented accommodative monetary policy stance had all generated expectations for reflation trade in 2021. This pointed to further downside momentum for the dollar, indirectly favoring gold.

Given the extended era of ultra-low interest rates, ongoing weakness in the dollar, swelling-debt-to-GDP ratios, rekindling of inflation pressures and uncertain timeframes for the mass rollout of approved vaccines, Valecha said that dips in the price of gold could be considered buying opportunities.

“However, investors should not expect a repeat rally of this year as the vaccine-led recovery optimism will cap the gains.”

Bitcoin has been the buzzword in the business community over the last few years, and some have speculated it could be touted as the next gold. Cornelia Meyer, a Ph.D.-level economist with 30 years of experience in investment banking and industry, i snot convinced: "For the time being Bitcoin is still too speculative to be a reliable store of value, which gold is. However, this year has seen the first albeit tentative inflow of institutional money into the crypto currency."

Meyer believed that while the rally in gold earlier in the year was fuelled by the pandemic, but there are also otehr factors at play. "It was further aided by the fact that traditional safe assets like OECD government bonds have extremely low or negative yields."


Indian fintech provider plans expansion into KSA, Oman

Indian fintech provider plans expansion into KSA, Oman
Ajay Adiseshann. (Supplied)
Updated 23 June 2021

Indian fintech provider plans expansion into KSA, Oman

Indian fintech provider plans expansion into KSA, Oman
  • The company is aiming to double the global volume of transactions it processes to nearly $6 billion by March 2022

RIYADH: Indian financial technology (fintech) provider PayMate is planning to expand into Saudi Arabia and Oman after having recently launched into the region in the UAE.

Mumbai-based PayMate, which helps companies manage their cash flow and invoice payments, is aiming that up to 15 percent of its total revenue will come from the Middle East market within the next year.

“Our first customer went live recently in the UAE. We have a strong pipeline of customers there. And we are also expanding to new countries like Saudi Arabia and Oman thereafter,” founder and CEO Ajay Adiseshann was quoted as saying by The Hindu newspaper this week.

“It is exactly the same model, the same use-case, same problem statement which we address here in India. We are delivering everything from India, via the cloud. But from a sales development, business standpoint, we have our local employees in those countries.”

The company is aiming to double the global volume of transactions it processes to nearly $6 billion by March 2022.

Chief Financial Officer Ravi Vishvanathan told the Economic Times that PayMate currently has 200 companies using its platform and is aiming to boost this to around 400 by March 2022.


GAMI presents growth strategy for Saudi military sector

GAMI presents growth strategy for Saudi military sector
Updated 23 June 2021

GAMI presents growth strategy for Saudi military sector

GAMI presents growth strategy for Saudi military sector
  • Ahmad Al-Ohali provided an overview of the national military industry strategy, the Industrial Participation Program, and the role of research and technology in Saudi Arabia’s defense strategy
  • H. Delano Roosevelt recalled the long history of cooperation between the US and Saudi Arabia, and predicted that America will continue to play a dominant role in supporting the Kingdom

RIYADH: The US-Saudi Business Council (USSBC) and the General Authority for Military Industries (GAMI) presented an executive virtual webinar on Wednesday titled “Understanding Saudi Arabia’s Military Industry Growth Strategy.”

Moderated by USSBC President and CEO H. Delano Roosevelt, the webinar provided participating US company representatives with an understanding of the Kingdom’s blossoming defense and security sector. 

Ahmad Al-Ohali, governor of GAMI and the event’s featured speaker, highlighted the authority’s role in developing the Kingdom’s military industry sector.

He also provided an overview of the national military industry strategy, the Industrial Participation Program, and the role of research and technology in Saudi Arabia’s defense strategy.

GAMI was established to grow the Kingdom’s military industries sector, in line with the Vision 2030 target of localizing more than 50 percent of defense expenditures by 2030.

GAMI is the regulator, enabler and licensor of the sector, and is responsible for its development and empowerment. 

Since the launch of Vision 2030 just five years ago, Saudi Arabia has achieved significant socioeconomic milestones while showing tremendous progress in transforming many key sectors of the economy. 

As a result of GAMI’s commitment to its mandate, the military industries sector has rapidly transformed and is now on a steady path to becoming a major contributor to Saudi Arabia’s non-oil gross domestic product. 

Al-Ohali emphasized the breadth of opportunities that Saudi Arabia’s defense localization presents to global investors and US defense partners.

Development of the military industries sector requires a whole ecosystem of research and technology institutions, a skilled workforce and other support functions, in addition to local production capabilities, he said. 

Roosevelt recalled the long history of cooperation between the US and Saudi Arabia, and predicted that America will continue to play a dominant role in supporting the Kingdom through future strategic relationships.

He said the USSBC will continue facilitating connections between US and Saudi companies, and educating American businesses about the benefits of engaging in the Saudi market.


SABIC, BASF discuss plastics circular economy in Riyadh

SABIC, BASF discuss plastics circular economy in Riyadh
Updated 23 June 2021

SABIC, BASF discuss plastics circular economy in Riyadh

SABIC, BASF discuss plastics circular economy in Riyadh
  • SABIC is working with UK-based company Plastic Energy to build its first commercial unit in Geleen
  • Chemicals giant focuses on recycling plastics

RIYADH: SABIC and BASF, two of the world’s largest chemical producers, met in Riyadh to share insights into their respective programs to develop circular economy solutions for the plastics industry.
SABIC shared progress it has made with TRUCIRCLE, a collection of processes that allow for the certification of polymers created through recycling of used and mixed plastic, certified bio-based renewable polymers, certified renewable polycarbonate (PC), and mechanically recycled polymers.
BASF discussed ChemCycling, a project to develop a pyrolysis technology that turns plastic waste into a secondary raw material called pyrolysis oil. The German multinational also explained how its plastic additives facilitate mechanical recycling of plastics.
SABIC is working with UK-based company Plastic Energy to build its first commercial unit in Geleen, The Netherlands, which will produce TRUCIRCLE certified circular polymers from recycled plastic.
“TRUCIRCLE has been introduced as a way to collectively showcase our circular innovations and help manufacturers reduce plastic waste through the adoption of a range of sustainable material solutions,” said Mark Vester, SABIC’ global leader circular economy. “It forms part of our circular economy business and is aligned with the UN Sustainable Development Goal of Responsible Consumption and Production.”


Humvee maker strikes military vehicle deal with Egypt

Humvee maker strikes military vehicle deal with Egypt
Updated 23 June 2021

Humvee maker strikes military vehicle deal with Egypt

Humvee maker strikes military vehicle deal with Egypt
  • The company will study the feasibility of developing an in-country assembly and manufacturing capability to allow Egypt to replace or supplement its existing Humvee fleet

DUBAI: Humvee manufacturer AM General has struck an initial agreement to help develop the production of military vehicles in Egypt.
The deal with the Egyptian Ministry of Military Production is expected to become a long term partnership to develop and build tactical vehicles in-country, the US-based company said in a statement on Wednesday.
The company will study the feasibility of developing an in-country assembly and manufacturing capability to allow Egypt to replace or supplement its existing Humvee fleet.
“Today’s signing ceremony further solidifies our long-standing relationship with the government of Egypt,” said AM General President CEO Andy Hove. “We look forward to applying our manufacturing and design expertise to help grow the Egyptian automotive industry.”
The agreement is part of a broader push to develop more domestic military manufacturing in Egypt which is already a major defense sector importer. Arab states are ramping up spending on local defense sector investments as part of their economic diversification agendas which aim to create more local jobs while at the same time substituting value-added imports with locally manufactured alternatives.


Oman to grant foreign investors 10-year residency

Oman to grant foreign investors 10-year residency
Updated 23 June 2021

Oman to grant foreign investors 10-year residency

Oman to grant foreign investors 10-year residency
  • Program is open to foreign retirees

RIYADH: Oman has announced a new program under which foreign investors are granted long-term residency, Asharq reported citing a statement by the Ministry of Commerce, Industry and Investment Promotion.

The Investor Residence program will be for a period of five to 10 years, subject to renewal, and is open to foreign retirees, the ministry said.

The program, starting in September, aims to attract quality investments according to clear and specific controls.