The gullible common man is ready to strip all his worth to greedily chase the proverbial pot of gold at the end of the rainbow. The Covid times are no different. Industries are doing bad, certain sectors like the hospitality and travel forced into a comatose stage. Layoffs are only too frequent, masks and sanitisers the order of the day.
The BSE Sensex dived amid a scare of Covid-19 pandemic on 23 March to 25880 points, losing 36.89% of the investor’s capital in just one month. The prompt government initiatives for recapitalisation and a mere mention of a vaccine buoyed up the sinking bourses all over the world, regardless of the actual economic relevance. The stocks recovered substantially soon, and the Sensex is 38407 points today.
The low interests from banks have pushed Indian investors back to the bourses like herds walking into a slaughterhouse. The glare of promoters liquidating their holdings has become only too common in the pandemic days. The massive sell-off by promoters include Shibu Lal, the former CEO of Infosys, Aditya Puri of HDFC, Chandra Sekhar Ghosh of Bandhan Bank. Mukesh Ambani joined too, hiving off a third of their shares in Jio, the goose that is laying the golden eggs. From Alibaba’s Jack Ma, many industry czars capitalised from the market.
The dilution of holding has rattled the markets, which have scurried for safer investments, and not surprisingly gold has come to the rescue and is most sought after investment now. From around Rs. Rs. 42K per 10 gms. in March the yellow metal is Rs.55370 today. The growth spree seems unstoppable for now and could reach Rs.60K per 10 gms. The government of India entered the scene with the 8 years, Series V Sovereign Gold Bond Issue at an issue price of 5334 per gm. The Bonds offer 2.5% interest, besides the value appreciation.
The rise of Exchange Traded Funds relying on gold could be a cause of the climb in the value of the metal, cornering 3356 tons globally. Indian ETFs are reported to hold about 750 tons Gold. The ETF fund managers make claims of the metal breaching Rs. 100K per gm luring investors into their fold, which may be an exaggeration. Gold, to me, is high, merely because of the safety and liquidity it offers. The metal has steadily appreciated and is constant with inflation.
The other gold-chase reason could be a China angle, the nation quietly beginning to trade in Renminbi, in an attempt to undermine the American Dollar. The US Dollar continues to be the main reserve currency in 65 countries, and seven sovereign nations officially have US dollar has their exchange currency. The attempts to undermine the greenback may not fructify in the short run.
Until the Covid scare leaves us, the industries begin to hum, and normalcy is restored, it will be gold that will rule the markets for at least the next six months out-performing the stock markets.
Sampath Kumar
Intrépide Voix
