Lebanon crisis pushes investors into gold markets, experts claim

Avvoltoi sul Libano: c'è chi pensa già agli affari della ricostruzione.

Lebanon crisis pushes investors <http://www.middleeastforex.com/index.php?section=343&module=navigationmodule#> into gold markets, experts claim

*The continuing crisis in Lebanon and the weakening of the US dollar <http://www.middleeastforex.com/index.php?section=343&module=navigationmodule#> means that more investors are choosing to hedge their bets on gold, according to a combined study from AC Neilsen, The Gold and Jewelry Group, and the World Gold Council. *

“In times of crisis, war and inflation, it is the natural reaction for investors to seek what they perceive to be safer investments. Investing <http://www.middleeastforex.com/index.php?section=343&module=navigationmodule#> in gold isn’t risk-free, but it is less risky than many other investments,” said Hashem Montasser, managing director <http://www.middleeastforex.com/index.php?section=343&module=navigationmodule#> and head of regional asset management <http://www.middleeastforex.com/index.php?section=343&module=navigationmodule#>, EFG-Hermes.

As Arabian Business went to press, the price of oil per barrel was up beyond US$75, and global analysts have predicted that the price is set to soar beyond US$80 in the next few weeks should the Lebanon and Israel conflict persist.

As such, investment banks have raised their gold <http://www.middleeastforex.com/index.php?section=343&module=navigationmodule#> forecasts on expectations that a weaker dollar and inflation will lure investors to buy the metal as a hedge, claimed Moaz Barakat, managing director for the Middle East <http://www.middleeastforex.com/index.php?section=343&module=navigationmodule#>, Turkey and Pakistan section of the World Gold Council.

The news comes in spite of historically high gold prices just two weeks into the conflict, with spot prices hitting a two-month high of US$675 in New York <http://www.middleeastforex.com/index.php?section=343&module=navigationmodule#>. According to Montasser, this is because investors perceive gold as the safe standard.

“Gold bears no credit risk and psychologically people like to be able to visualise their investment and know that it’s not going to go away in times of crisis,” he said. “It is the typical ‘flight to quality’ response whereby investors, during times of uncertainty in the financial markets and the world economy, move their capital away from riskier or more volatile assets, into safer, less volatile ones.”

Analysts have said that in such a tense environment, events that typically would be overlooked are scrutinised, resulting in the type of market reaction that demonstrates lowered consumer confidence. Although neither Lebanon nor Israel are major oil producers, some investors fear the conflict could quickly destabilise the wider Middle East region, one of the world’s most important oil centres.

Montasser said that the wider economic landscape was relatively stable for Lebanon, should there be an imminent end to the conflict.

“Investors tend to have diverse portfolios, of which only some shares would be in Lebanon. So far we have pulled out none of our investments because Lebanese equities, at this point, still remain attractive,” he claimed.

“Lebanon has always been regarded as a higher risk option in the GCC because of its budget deficits and this has always been factored into any decisions. Here we have a situation, like any other war crisis, where the politics are overwhelming the economic fundamentals. It’s an entirely natural and typical market over reaction.”

The EFG-Hermes director even hinted that Lebanon’s economic crisis might also pave the way for buying opportunities in the future when things “have, presumably, leveled out.”

Meanwhile, after just seven months in operation, the Dubai Gold and Commodities Exchange passed two milestones.

The total value of gold trades surpassed the US$4 billion mark, while volume exceeded 200,000 trades, and foreign currency futures are now being traded along with its gold and silver exchange. The floor is now open to trade euros, the yen and the British sterling against the US dollar.

In the future, the exchange is expected to roll out trading for other commodities, such as steel, marine fuel oil, freight rates and cotton.

Meanwhile, leading economists from around the world are considering organising a special conference in August, to look at global initiatives which could help rebuild Lebanon.

It is thought Emaar has already been approached over the conference.