Recent natural catastrophes, including the COVID pandemic to the banking crisis to geopolitical tensions have all led to significant uncertainty economic around the world, negatively affecting economies as investors shift to a position of holding off on investments.
The biggest beneficiary of this uncertainty has been gold, whose price has soared, with investors seeing it as a safe investment bet. Since the Israel-Hamas conflict culminated into a war on October 7th, the price of gold has risen 8% to stand at a high of Sh297,948.50 ($1,985) per ounce.
Through time, gold has become a favorite for investors during crises. When geopolitical tensions rise, investors usually become risk averse. With the fear that these conflicts will negatively affect financial markets and economies as a whole, they seek refuge in assets such as gold that have proved to be safe havens. As a highly liquid asset, gold gives investors the opportunity to sell or buy quite easily, even it times of crisis.
In Kenya, the price of gold exchange-traded funds (ETFs) at the Nairobi Securities Exchange has jumped to a new high of Sh2,840 – the last time the prices reached such a high was at the start of the Russia-Ukraine war.
According to Wesley Manambo, an analyst at Standard Investment Bank, the increase is as a result to movements in the gold commodity that’s pricing in the compounded geopolitical risks on the developments in the Middle East.
“The uptick in price is in response to a likely rise in demand and the ETF adjusting to gold trends. When faced with such (geopolitical tensions), investors often run to preserve purchasing power because of the ripple effects involved including disruptions in supply chain and stubborn high freight fees,” he said
For ages and through history, gold tends to perform well during geopolitical crises. This historical precedent has always caused investors to shift to it during uncertainties.
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