• 29 Dec 2020

Over 250 monetary stimulus measures taken around the world Investment House: Global gold holdings rise

Doha - 22 March 
Investment house Co. confirmed that the increase in global gold holdings during the first quarter of this year as one of the most important safe havens for investments globally.  Investment house Co. added in a report that gold prices have been rising in a progressive upward wave that started in the middle of 2019 from 1270 dollars for an ounce to reach its highest levels in the last 7 years at 1766 dollars during the Corona pandemic.

Mr. Walid Al-Fuqaha, Director of the company’s trading room, confirms that the important events the world witnessed contributed to enhancing this wave. On the top of these events are; the war of tariffs between China and the United States, the changes in the position of monetary policy in the United States, the negotiations of Britain's exit from the European Union (Brexit) coming into a critical stage, ending up with the Corona pandemic. All these made gold the most attractive safe haven for investors and investment funds in light of this diversity of political, economic and health crises that the world witnessed. Yet, the most controversial question asked by investors is: Will gold continue to rise to reach record levels exceeding $ 2000 an ounce?

The report of Investment House Co. indicated that the measures taken by most of the global central banks, on top of which are the four major central banks (American, Japanese, British, and European) which resulted in reducing interest and pumping more than $ 5 trillion into economy at the level of these countries, concurrently with more than 250 monetary stimulus measures taken around the world during the Corona pandemic, which resulted in an inflation of more than $11 trillion in global economy according to the reports of the International Finance Institute and is expected to increase to reach $ 15 trillion, which pushes the global economy into a new medium to Long-term cycle of quantitative easing, during which gold is expected to be one of the most beneficiaries of it.

Investment House Co., in its report, also pointed out the rise of global holdings of yellow metal, according of the World Gold Council's report during the first quarter of 2020. Readings also showed central banks bought 145 tons during the first quarter only. The observant of gold movements also notices that central banks have purchased more than 636 tons of gold since the start of the wave in the middle of 2019. On  the level of gold-backed investment funds, their inflows and holdings have increased by more than 984 tons in the same period, and this gives signs of investors' fear and hedging against the effects of easing and stimulus policies of global economy, which is expected to result in inflation and decrease in currency rates.  Gold holdings are also expected to continue to increase.

Al-Fuqaha adds that most of the statements of monetary policy makers around the world confirm that it is not possible to reach an economic recovery without an effective vaccine for the virus, as the economic damage caused by the virus to most of the economic sectors, especially aviation and services, forced the International Monetary Fund to launch the term of "Big Lockdown" with more blurry signs of future prospects of the global economy and an alert of a deep recession in his last report. He also expected global GDP to shrink by about 3 percent (3%) this year, in conjunction with fears of a second wave of the virus, which contributed to the rise of gold price to levels of 1743 last weekend, close to the highest levels.

Trade Tensions:

Al-Fuqaha further confirms that despite the signing of the first phase of the trade agreement between China and the United States, which the world witnessed at the beginning of the year, yet, the accusations  exchanged between the two countries about the source of the virus may give indications of the difficulty of reaching a comprehensive trade agreement for all outstanding issues, especially that there are still two remainining stages to reach the final agreement.
Investment House Co.'s report also predicted that these factors may constitute a fertile environment for more expected gold hikes on the long and medium term, since, according to the expectations, all of the factors mentioned  may need a long period to be treated, as they have consequences that include increased inflation and low currency rates, which opens the door for expecting more hikes on gold in order to hedge against negative results.