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."


Many global stocks lower after Wall St. decline

Many global stocks lower after Wall St. decline
Updated 10 min 46 sec ago

Many global stocks lower after Wall St. decline

Many global stocks lower after Wall St. decline
  • London and Frankfurt opened lower, while Shanghai and Tokyo also declined

BEIJING: Major global stock markets were mostly lower Tuesday after Wall Street retreated from record highs.

London and Frankfurt opened lower, while Shanghai and Tokyo also declined. Hong Kong and Seoul advanced.

Wall Street futures gained a day after the benchmark S&P 500 index lost 0.5 percent on declines for tech, bank and energy stocks.

Investor optimism has been boosted by higher corporate profits, US hiring and consumer confidence. Still, traders are uneasy about a rise in inflation and interest rates and renewed coronavirus infections that prompted some governments to reimpose anti-disease controls.

“Wall Street could be in for a few choppy trading weeks as more of the same strong earnings beats becomes the theme,” said Edward Moya of Oanda in a report.

In early trading, the FTSE 100 in London declined 0.3 percent to 6,982.77 and the DAX in Frankfurt lost 0.2 percent to 15,335.68. The CAC 40 in Paris shed 0.6 percent to 6,256.90. On Wall Street, futures for the S&P 500 and the Dow Jones Industrial Average were up less than 0.1 percent.

On Monday, the Dow lost 0.4 percent. Both the S&P 500 and the Dow hit highs on Friday.

Capital One lost 0.9 percent and Valero Energy slid 2.3 percent.

The tech-heavy Nasdaq composite slid 1 percent. Chipmaker Intel fell 1.7 percent.

In Asia, the Shanghai Composite Index lost 0.1 percent to 3,472.94 while the Nikkei 225 in Tokyo tumbled 2 percent to 29,100.38. The Hang Seng in Hong Kong gained 0.1 percent to 29,135.73.

The Kospi in Seoul rose 0.7 percent to 3,220.70 while the S&P-ASX 200 in Sydney sank 0.7 percent to 7,017.80.

India’s Sensex was up less than 0.1 percent at 47,978.05. New Zealand, Singapore and Jakarta declined while Bangkok advanced.

This week, 81 of the 500 members of the S&P 500 index are due to report earnings, as are 10 of the 30 members of the Dow, including Johnson & Johnson, Verizon Communications and Intel. On average, analysts expect quarterly profits across the S&P 500 to be up 24 percent from a year earlier, according to FactSet. In energy markets, benchmark US crude rose 82 cents to $64.25 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude, used to price international oils, gained 90 cents to $67.95 per barrel in London.

The dollar advanced to 108.40 yen from Monday’s 108.11 yen. The euro gained to $1.2070 from $1.2039.


Surge in demand for companies looking to set up in KSA

Surge in demand for companies looking to set up in KSA
Updated 30 min 36 sec ago

Surge in demand for companies looking to set up in KSA

Surge in demand for companies looking to set up in KSA
  • Consultants have seen a 50 percent rise in activity in the first quarter of 2021

RIYADH: Sovereign AEI, a firm which specializes in helping companies set up operations in the Kingdom, has seen a spike in business activity.

“The beginning of this year has been very encouraging as we have seen a 40 to 50 percent increase in Saudi Arabia market-entry activity, when compared to pre-pandemic levels,” Stuart D’Souza, co-founder and CEO of Arabian Enterprise Incubators (AEI), one of the partner firms that makes up Sovereign AEI, told Arab News.

As part of the ambitious Riyadh Strategy 2030 announced by Crown Prince Mohammed bin Salman earlier this year, the government wants to attract up to 500 international companies to set up their regional bases in the city, create around 35,000 new jobs for Saudi locals, and double the capital’s population.

The strategy aims to invest up to SR70 billion ($18.67 billion) into the national economy by the end of the decade. The strategy is already paying dividends.

“Sovereign AEI is helping to facilitate this new strategy. Our products and services are conducive with Riyadh Strategy 2030 by helping new and existing businesses capitalize on the expected significant growth forecast for the Kingdom,” Paul Arnold, managing director of Sovereign Saudi Arabia, told Arab News.

BACKGROUND

• The government wants to attract up to 500 international companies to set up their regional bases in the city, create around 35,000 new jobs for Saudi locals, and double the capital’s population.

• The strategy aims to invest up to SR70 billion ($18.67 billion) into the national economy by the end of the decade. The strategy is already paying dividends.

“We are also encouraging businesses to look ahead and establish a physical presence in the Kingdom, while taking into consideration new criteria set to come into force by 2024, the specifics of which are yet to be formally announced,” he added.

Sovereign has been operating in Saudi Arabia for about 20 years and AEI since 2012. They formed their joint partnership in 2019.

In 2019, the company helped 600 businesses visit Saudi Arabia to investigate potential opportunities. Half were first-time visitors and over 70 percent went on to establish new business links in the Kingdom. AEI alone has helped over 1,500 foreign businesses to enter, establish or expand in Saudi Arabia since 2012.

Last year, despite the restrictions as a result of the pandemic, Sovereign AEI reported a 300 percent increase in corporate services in Saudi Arabia. The team is expecting this positive growth to continue in 2021.

“The Saudi market presents tremendous opportunities. Most companies are now aware of the potential of the market, the main pillars of Vision 2030 and the significant number of economic reforms carried out over the past 18 months. However, plotting a road map to success can be a challenge,” Arnold said.

“Our principles are to educate, de-risk and enable the client’s ability to enter, establish or expand in the Kingdom. Our robust performance in the first quarter is a testament to the attractive nature of the Saudi market and we continue to see a growing interest and increasing shift of client focus toward the Kingdom, as the country continues to unveil new strategic initiatives,” he added.


New oil price surge caps year of recovery since ‘Black Monday’

New oil price surge caps year of recovery since ‘Black Monday’
Updated 32 min 54 sec ago

New oil price surge caps year of recovery since ‘Black Monday’

New oil price surge caps year of recovery since ‘Black Monday’
  • Anniversary of US crude plunging to minus-$40 at start of pandemic recession

DUBAI: Oil prices resumed their surge on global markets on Tuesday as traders shrugged off the memory of “Black Monday” 2020, when some crude prices went into negative territory at the start of the pandemic recession.
Brent crude, the global benchmark, went above $68 a barrel for the first time in over a year, while West Texas Intermediate, which approached minus-$40 at the depth of the oil crisis exactly a year ago, leapt above $64.
The resurgence in the oil price — which has seen some experts suggesting the possibility of a “supercycle” in which crude goes back above $100 a barrel — is partly down to improved prospects as the global economy moves outs of pandemic lockdowns.
The global rollout of coronavirus vaccines has led economic experts to predict a sharp recovery in growth in 2021, with the International Monetary Fund recently forecasting a sharp rise in economic activity for the rest of the year. China last week said its economy had grown by 18.3 percent in the first quarter of the year.
But oil analysts believe the actions of OPEC+ — the producers’ alliance led by Saudi Arabia and Russia —had been the biggest factor in helping reduce the huge glut of oil that threatened to swamp the world market last spring.
Since last April, OPEC+ has taken more than 3 billion barrels of oil off the global market, through a combination of strong internal discipline and voluntary cuts by Saudi Arabia, the world’s biggest exporter.
Prince Abdul Aziz bin Salman, the Saudi Energy Minister and co-chairman of OPEC+, has repeatedly urged caution on the 23-member organization as COVID-19 cases re-emerge in some parts of the world. Europe and India are the latest causes of concern.
“The reality remains that the global picture is far from even, and the recovery is far from complete,” he told the last OPEC+ meeting.
The oil price bulls are encouraged by increasing demand from China, the biggest oil consumer in the world.
Figures from the country’s customs regulator, released on Tuesday, showed that crude oil imports from Saudi Arabia — its biggest supplier — had risen by nearly 9 percent in March, with strong domestic demand bolstered by a freeing up of supplies after port congestions.
Some analysts still believe Brent crude could hit $75 this year, and reckon $100 a barrel next year is a possibility.
But nobody appears to believe the volatile market conditions of last spring, and negative oil prices, will happen again.
Robin Mills, chief executive officer of consultancy Qamar Energy, told Arab News: “That was a pretty unusual set of circumstances.”
He added: “Never say never, and traders have short memories, but I think the fixes in place would make it unlikely to go negative again.”


Egypt targets investments of $80 billion

Egypt targets investments of $80 billion
Updated 45 min 7 sec ago

Egypt targets investments of $80 billion

Egypt targets investments of $80 billion
  • Plan forecasts 125 percent increase in funding for production sector

CAIRO: Egypt is aiming to raise EGP 1.25 trillion ($80 billion) as part of its investment plan for the fiscal year 2021/2022, according to the Egyptian Minister of Planning and Economic Development Hala Al-Saeed.

The investment plan forecasts a 125 percent increase in funding for the production sector, the minister said, along with a 30 percent increase for the country’s service sector.

Al-Saeed said the plan helps address the public spending commitments related to health and education and scientific research, as well funding for the continued efforts to combat the COVID-19 pandemic.

She said priority would be given to high-productivity sectors that drive sustainable economic growth in Egypt such as the manufacturing, communications, information technology and agriculture sectors.

According to the minister, the most important goals of the 2021/2022 sustainable development plan include addressing important social issues such as gender equality and public investments into green projects.


Korean envoy invites Saudi Arabia to GICC2021

Korean Ambassador Jo Byung-Wook during a meeting with Prince Saud bin Talal bin Badr and officials from Ministry of Municipal and Rural Affairs and Housing. (Supplied)
Korean Ambassador Jo Byung-Wook during a meeting with Prince Saud bin Talal bin Badr and officials from Ministry of Municipal and Rural Affairs and Housing. (Supplied)
Updated 20 April 2021

Korean envoy invites Saudi Arabia to GICC2021

Korean Ambassador Jo Byung-Wook during a meeting with Prince Saud bin Talal bin Badr and officials from Ministry of Municipal and Rural Affairs and Housing. (Supplied)
  • The annual conference provides an opportunity to present projects to potential Korean partners, and to hold personal consultations

RIYADH: South Korean Ambassador Jo Byung-Wook has invited Saudi Arabia to attend the Global Infrastructure Cooperation Conference (GICC2021).

The annual conference provides an opportunity to present projects to potential Korean partners, and to hold personal consultations.

The ambassador met Prince Saud bin Talal bin Badr, undersecretary at the Ministry of Municipal and Rural Affairs and Housing for housing subsidies, and general supervisor of the International Cooperation Department at the ministry in Riyadh.

GICC2021 is scheduled for “later this year,” the ambassador told Arab News, adding that the meeting “reviewed the close, friendly and cooperative relations” between the two countries, and “agreed to continue to expand bilateral cooperation in the housing sector.”

He said: “I commended the Saudi government’s efforts to help Saudi families own their house through the Sakani program, taking note of the signing of four agreements during the Sakani Forum held last Thursday in Riyadh.”

The Sakani program helped 70,000 families in the first quarter of 2021, surpassing its target of serving 51,000 families.

It was formed in 2017 by the Ministry of Housing and the Real Estate Development Fund, with the aim of facilitating home ownership in the Kingdom by creating new housing stock, allocating plots and homes to nationals, and financing their purchase. It has a goal of reaching 70 percent home ownership by 2030.

The program aims to serve 220,000 Saudi families this year by creating 50,000 housing units, facilitating the reservation of 30,000 residential land plots, and arranging 140,000 real estate loans. To date, Sakani has enabled more than 350,000 families to own homes.