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Macroscope: Gold – Glittering through the crisis

microscope gold blog

Introduction:

In “The Great Partition: The Making of India and Pakistan”, a Sikh woman, Taran, relates how her mother took all the gold and tied it in handkerchiefs and distributed it among different family members for safekeeping. We did not know where each of us would end up – this gold was our security.

Gold, as highlighted above, has been the asset of choice in times of trouble, and hence, titled: “safe-haven asset”. Disguising itself as tool for monetary comfort, it defined the monetary landscape during the gold standard era.

This narrative is time-tested, as even today, in times of heightened volatility, where wealth preservation is defining the investors’ appetite, Gold is soaring new highs, crossing Rs. 56,000 per 10 gm levels!

2020 has been riddled with Covid headlines across borders, as socio-economic landscape of India and the world came to a standstill. With “Fear” as market mood, and volatility its theme, indices wiped out trillions in a matter of 2 months. Indian equities went from All-time highs to their biggest drop (-~40%) in 10 years to between Dec’19 to Mar’20!

data on gold

Gold’s Price Story – “Converting ‘Cry’-sis To Currency”

2020 has seen Gold’s shine get brighter as investors dump other asset classes, courtesy of Covid 19, and never-seen-before volatility levels (Higher than Global Financial Crisis!). From inflows, to price-rises, Gold is setting record numbers, day-over-day and month-over-month. As coronavirus cases surge, impeding unlocking of economies, and propagating uncertainty about the future, investor’s belief in the yellow metal sees further strengthening! The conservative climate is conducive for Gold, as investors and institutions bet on Gold, as a sign for future fears.

Graphs below highlight, Gold’s performance in H1CY2020.

Gold Data

As newer times dawn upon us, investors flock towards older tendencies, finding comfort in world’s most cherished metal.

Gold’s Demand Story – “Get Set GO-LD”

Our markets have been subject to crises, ranging from financial to health, for as long as there have been markets! The one common theme amongst investors during these times was their vibrant affinity for the yellow metal.

This time, with coronavirus, the “Yearn for-Yellow” (read as: Gold) has followed suit, as Gold investment vehicles record their biggest inflows……but with a twist!

On a decadal view, the growth in Gold demand has been very poor, as its 2 biggest consumers, China and India (40% of world’s population and 16% of world’s GDP) have been losing interest in its shine, as is evidenced via the stark decrease in the per capita spend on the metal.

So, you must be wondering, “If 40% of the world is moving away from Gold, then how is the price increasing?”

The answer is quite simple, “Because 60% of the world is moving towards to it”

The graphs below highlight the divide in the yellow metal’s demand drive

Gold

The relentless pursuit for Gold by international markets is a major driver for Gold demand, and hence it’s prices! The demand pull from the eastern hemisphere holds higher weight in charting the yellow metal’s desirability, covering up for the waning shortfall across the ponds by the next-tobe developed economies.

Investor Takeaway – Making Sense of The Present & The Future

As coronavirus cries translate to numbers, investors continue to shift their sentiments in limiting wealth erosion. Covid-19 has not spared, even, the Global powerhouses as can be seen below:
➢ US economy suffered its worst quarter since WWII as GDP, shrinking by 32.9%.
➢ UK hit by worst contraction in 41 years, shrinking by 2.2%.
➢ Germany sees deepest decline on record, shrinking by 10.1%

All hopes are now lying around the hypes of vaccines! If trials are deemed unsuccessful, then the rush for Gold may amplify, with no respite for other asset classes, in the short-term at the very least.

A few key factors driving the current Gold demand and its future appetite are as follows:

1.  Insurmountable Covid-19 Case Count

After hearing of it in December 2019, the coronavirus case count has increased multifold to ~20 Million people today. The world continues to struggle with capturing and containing the virus. As an example, the world’s largest economy, USA, too has succumbed to it, recording 50K+ cases for 8 straight days, at the time of writing this piece.

Here is a graph to help visualize the virality of the Coronavirus

Gold glitter

As seen above, Coronavirus continues to spread like a wildfire, trumping the collaborative efforts of the world in combating it. As road ahead gets foggier, the preference for Gold over asset class will continue to grow, driving demand and prices upwards.

2. Redundancy in Relief Packages

As the world went into a lockdown, in response to the rising and resilient virus, Central banks started designing an exit plan. The lockdown was a harbinger for upcoming economic stress, as global research bodies cut away all optimism, chartering documents highlighting expected economic contractions.

The covid 19 fears took shape via massive dumping of equities across the globe, witnessing unprecedented downswings. In response, central banks expedited announcement of relief packages announcements, as is shown below:

Gold glittering the economy

Relief packages were styled poorly, and hence, deemed unfit to tackle the economic locks, further aggravating investor tensions, making bullion more attractive as the safe-haven asset.

The very real, and just as immediate, recessionary fears continue to make for a perfect dwelling ground to sustain, and possibly grow, the current affinity for Gold in the short-to-medium time frames.

3. Near Zero Levels Interest rate + Diseased Dollar

Gold’s allure has become louder in today’s times, as concerted expansionary policies, and asset purchases by central banks, keep interest rates at historically low levels. Gold can act as inflation-hedge with debt ballooning across borders, while simultaneously being subject to incredibly low costs of holding. This can pave way for more demand, as we realize world-wide economic shrinkages.

As the world’s current reserve currency, US Dollar, witnesses its biggest fall in a decade, Investors reprise their faiths in the old-school system, re-aligning their monies in the yellow metal.

 

Uncertainty and speculation go together, with retrospect being the best teacher! Like has always been the case, Gold’s attractiveness as an investment, tends to be very robust during weaker economic periods. With low visibility ahead, there is new life to this temporary temperament towards the shiny metal. Gold’s ability to provide psychological comfort in times of stress will always (arguably) make it the de-facto money-pit choice.

 

The adage, “Old Is Gold” certainly commands merit, and now, we know why.

The Goldilocks Planet of Investment – Digital Gold

The Goldilocks Planet of Investment - Digital Gold

If you are a space buff and follow, all the latest updates in the space race, appalled by the beauty and mysteries of space you already know what a Goldilocks planet and probably why are we referring to Digital Gold as it. You can skip and straight away go to the section ‘Why is 24K Digital Gold A Better World for Gold Investment?’ Before we fly into the idea of Digital Gold being the better alternative world for gold investment, it would be wise to understand why are we referring to Digital Gold being a Goldilock planet and the source of this term.

Understanding the Concept of ‘Goldlilocks Planet’

It all starts with a fairy-tale: ‘Goldilocks and The Three Bears’. This is the story of a little girl with golden locks of hair who confidently walks into a home of a family of bears who aren’t at home and checks out her compatibility with their different sized chairs and beds. Of course, she eats all their porridge and does get caught in the end but indeed is the idea behind naming these special planets Goldilocks planet. 

A Goldilocks planet is all about the idea of finding a world that is possibly habitable by carbon-life forms, based on similar features and conditions that exist on Earth. This is extremely difficult to find despite the fact that the universe is limitless and scientists have found only a few possible Goldilocks planet with Earth-like living conditions. You could watch or recollect your memories of watching Christopher Nolan’s science-fiction opera, ‘Interstellar’. It has the concept of Goldilocks planets well explored.

How is Gold investment a Goldilocks Planet?

The immediate idea to buy and sell or trade gold would require a jewellery store or a bank. What if these options aren’t available due to circumstances that could vary from the store is too far to you are sitting at home due to a lockdown? You will need to find a Goldlick alternative for Gold. Digital Gold is not just the answer but it could be possibly a better alternative to regular Gold in multiple ways. However on the contrary in the literal sense of Goldilocks planets, there is no place like home when it comes to Earth and no matter how many Goldilocks planets there are in the universe, bursting with life, Earth is the only home planet we have.

Why is 24K Digital Gold A Better World for Gold Investment?

If regular Gold is Earth, then Digital Gold is a planet like Asgard with narcissistic God-like humanoids roaming around with hammers and staffs with special powers. Not really, that’s not true but in case you want to be an ‘InvesThor’ of Gold, Digital Gold is the right option for the following benefits:

  1. Pay only for 24K Gold: When you buy the jewellery store you are not paying for the gold you are also paying on metals and studded stones and gems. But that is different in the case of buying digital gold. Every rupee you invest is paid to pure 24K gold which has 99.9% of purity ridding it of making charges and precious stones that don’t have any resale value.
  2. The convenience of trading: We are all aware that buying gold can be time-consuming as you need to visit the jeweller, store or bank. With the digital gold investment, you can buy and sell gold online anytime and anywhere as per your comfort. You can even track your gold investment if you are buying gold on our app.
  3. Gold can be converted to cash in seconds: You can easily sell digital gold online anytime and anywhere. As soon as you sell the 24k gold the amount is successfully transferred to your bank account. Where in to liquidate the physical gold you need to visit the seller during the working hours and then you sell the gold.
  4. Zero storage hassles: We all know physical gold needs to be stored in bank locker and vaults, which come with long term expensive storage costs where digital gold saves from such hassles as it stores your accumulated gold in safe and secure vaults.
  5. Digital Gold investment doesn’t have to be a big amount: The best part about buying Gold online is that you do not have to buy large amount of Gold unlike at the stores and keep accumulating it over time by buying small amounts at a time. For example, on our app, you can buy gold for as low as ₹1000 at a time, regardless of what the price of Gold is at the time.

While you can be an ‘InvesThor’ of Gold on our app, do not forget that the most simple life forms are the most powerful and that a Goldilocks planet of gold investment requires simplicity like the scientifically almost immortal amoeba, to thrive.

‘We’re made of star stuff’ – Carl Sagan

 

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