Lebanon crisis pushes investors into gold markets, experts claim

[rossana <rossana at comodinoposta.org>]

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.



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