COVID-19: Gold and less volatile currencies growing in attractiveness – Economist

A lot of investors the world over have been shaken by the Coronavirus pandemic and the associated fear has compelled individuals to move their funds from one investment option to the other in order to protect their gains.

As the world deals with the Coronavirus pandemic, investors are increasingly moving their funds from stocks, bonds and even real estate into safer investment vehicles like gold, less volatile currencies, and stocks that will help them benefit from the crisis like health-related stocks during the current pandemic.

Courage Boti is an Economist with Databank and he explains the impact of the coronavirus on investor decisions in Ghana and around the world saying: “There is so much uncertainty, no one knows how long COVID-19 is going to stay and how it’s going to affect supply chain. So under such uncertain circumstances, they will want to move into safe-haven assets.”

“So we saw in the early stages, foreign investors in Ghana repatriating their investments and they would ordinarily do so, sell-out from markets they consider risky and then lock themselves in a position they consider relatively safer that will preserve the value of their investments. And so the GSE I think, year to date is down 17.54% on the composite index and you look across the globe, markets like the British FTSE 100 is down 20% and Japan’s Nikkei is down by 6.5%, Australia’s S&P/ASX 200  is down 15%. So it’s widespread.”

Gold for example which lost its lustre during some parts of last year has rallied in recent months.

It began 2019 at around $1,300 an ounce and ended the year at around $1,500.

Eight months into 2020, however, gold has surged to around $1,900 an ounce making it a safe haven.

On the currency front, less volatile examples like the Swiss Franc and the Japanese Yen have also become favourites for most investors.

Here is Courage Boti again breaking down why local and international investors will opt for such safe havens:

“Normally when investors are moving, they will move into gold, they will move into the most stable currencies, they will move into the defensive stocks. Defensive stocks are stocks like pharmaceutical stocks, something like the consumer goods stocks and things like that. Gold has an intrinsic value, it’s not like a printed currency that can fluctuate and so gold is considered a safe haven. Swiss Franc because, you know Switzerland, they have a well-functioning capital market that is resistant to volatilities and it applies to Japanese Yen also.”