According to a Invesco study of central banks and sovereign wealth funds, more nations are returning their gold holdings as insurance against the kind of sanctions the West has imposed on Russia.
The financial market collapse of last year resulted in significant losses for sovereign money managers, who are now "fundamentally" reevaluating their business models in light of the persistence of increased inflation and geopolitical concerns.
The annual Invesco Global Sovereign Asset Management Study polled 85 sovereign wealth funds and 57 central banks, and more than 85% of them predicted more inflation in the next ten years than they did in the previous one.
In that context, gold and emerging market bonds are viewed as safe bets, but the West's decision to freeze nearly half of Russia's $640 billion in gold and foreign exchange assets in response to the invasion of Ukraine last year also seems to have precipitated a change.
A "substantial share" of central banks expressed alarm about the precedent that had been created, according to the study. Nearly 60% of respondents claimed that it had increased the appeal of gold, and 68% were storing their reserves at home, up from 50% in 2020.
Anonymously cited central bank statement: "We did have it (gold) held in London... but now we've transferred it back to own country to hold as a safe haven asset and to keep it safe."
That is a widely-held opinion, according to Rod Ringrow, head of formal institutions at Invesco, who oversaw the report.
"'If it's my gold then I want it in my country' (has) been the mantra we have seen in the last year or so," he said.
Some central banks are being encouraged to diversify away from the dollar by geopolitical worries as well as opportunities in emerging countries.
Although the majority continue to consider the dollar as the only viable choice as the world's reserve currency, a growing 7% also think that the rising U.S. debt is also bad for the dollar. From 29% last year, only 18% of respondents now consider the Chinese yuan to be a serious rival.
Geopolitical tensions are perceived by nearly 80% of the 142 institutions polled as the main risk over the next 10 years, while inflation is mentioned as a worry for the following year by 83% of respondents.
The most appealing asset class today is infrastructure, particularly when it comes to initiatives that involve the production of renewable energy.
India continues to rank among the top investment destinations for a second year in a row due to worries about China, while countries like Mexico, Indonesia, and Brazil are benefiting from the "near-shoring" trend, which sees businesses create factories close to their target markets.
In addition to China, Britain and Italy are viewed as being less desirable, and property is currently the least desirable private asset due to rising interest rates, work-from-home practises, and internet purchasing habits that emerged during the COVID-19 pandemic.
Ringrow claimed that wealth funds that understood the dangers posed by inflated asset prices and were prepared to make significant portfolio adjustments outperformed the market last year. Future events would be the same.
"The funds and the central banks are now trying to get to grips with higher inflation," he said. "It's a big sea change."
(Source:www.dailystar.net)
The financial market collapse of last year resulted in significant losses for sovereign money managers, who are now "fundamentally" reevaluating their business models in light of the persistence of increased inflation and geopolitical concerns.
The annual Invesco Global Sovereign Asset Management Study polled 85 sovereign wealth funds and 57 central banks, and more than 85% of them predicted more inflation in the next ten years than they did in the previous one.
In that context, gold and emerging market bonds are viewed as safe bets, but the West's decision to freeze nearly half of Russia's $640 billion in gold and foreign exchange assets in response to the invasion of Ukraine last year also seems to have precipitated a change.
A "substantial share" of central banks expressed alarm about the precedent that had been created, according to the study. Nearly 60% of respondents claimed that it had increased the appeal of gold, and 68% were storing their reserves at home, up from 50% in 2020.
Anonymously cited central bank statement: "We did have it (gold) held in London... but now we've transferred it back to own country to hold as a safe haven asset and to keep it safe."
That is a widely-held opinion, according to Rod Ringrow, head of formal institutions at Invesco, who oversaw the report.
"'If it's my gold then I want it in my country' (has) been the mantra we have seen in the last year or so," he said.
Some central banks are being encouraged to diversify away from the dollar by geopolitical worries as well as opportunities in emerging countries.
Although the majority continue to consider the dollar as the only viable choice as the world's reserve currency, a growing 7% also think that the rising U.S. debt is also bad for the dollar. From 29% last year, only 18% of respondents now consider the Chinese yuan to be a serious rival.
Geopolitical tensions are perceived by nearly 80% of the 142 institutions polled as the main risk over the next 10 years, while inflation is mentioned as a worry for the following year by 83% of respondents.
The most appealing asset class today is infrastructure, particularly when it comes to initiatives that involve the production of renewable energy.
India continues to rank among the top investment destinations for a second year in a row due to worries about China, while countries like Mexico, Indonesia, and Brazil are benefiting from the "near-shoring" trend, which sees businesses create factories close to their target markets.
In addition to China, Britain and Italy are viewed as being less desirable, and property is currently the least desirable private asset due to rising interest rates, work-from-home practises, and internet purchasing habits that emerged during the COVID-19 pandemic.
Ringrow claimed that wealth funds that understood the dangers posed by inflated asset prices and were prepared to make significant portfolio adjustments outperformed the market last year. Future events would be the same.
"The funds and the central banks are now trying to get to grips with higher inflation," he said. "It's a big sea change."
(Source:www.dailystar.net)