Vincent Fabian Thomas (The Jakarta Post)

Jakarta ●
Sat, November 20, 2021

2021-11-20
08:00
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Markets
gold, investment, inflation, personal finance
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With the stock market at an all time high and inflation rising rapidly, some analysts advise having gold in your portfolio to prepare for global economic uncertainty and the lingering risk of COVID-19.

Monex Investindo Futures research chief Ariston Tjendra said rising inflation was fueling gold prices as investors sought to secure asset values ​​against rising inflation. The gold market is also expected to benefit from the expectation of further waves of COVID-19 in many countries, which pose the threat of a further global economic downturn.

However, a hike in the US Federal Reserve’s key rate next year could dampen the rise in the price of gold next year.

“Gold is a viable option for long-term investment. The pandemic has not yet ended and there is a possibility of further waves that could affect international gold prices, ”said Ariston Jakarta Post November 12.

In the United States, the Consumer Price Index (CPI) rose 6.2% year-on-year in October, marking the country’s highest inflation rate in three decades, while annual inflation China hit 1.5% in October, the highest rate in 13 months.

Inflation in Indonesia is on the rise, albeit at a relatively low rate of 1.66% year-on-year in October, according to Statistics Indonesia. However, the finance ministry warned in October of a possible spillover of global inflation into domestic prices.

Read also: No equity “bubble” in Indonesia, for now

Meanwhile, European countries have become the global epicenter of COVID-19 despite high vaccination rates compared to Indonesia. Countries close to Indonesia, such as Singapore, Vietnam and Thailand, have also recently recorded an increasing number of new cases every day.

Indonesia’s daily COVID-19 toll hit its lowest level since shortly after the country reported its first cases, but the government has reported an increase in the number of cases in several cities and regencies in Java.

Based on these conditions, TRFX director Garuda Berjangka, Ibrahim Assuaibi, said the price of gold could rise to $ 1,923 per ounce (or Rp 984,209 per gram, including certificate and administrative fees) d ‘by the end of this year and above $ 2,000 an ounce next year, well above the price of $ 1,866 an ounce, it was Thursday, according to prixor.org.

Gold, like other asset classes, is not exempt from investment risk, but its volatility is relatively low.

In 2021, the price of gold was expected to trade between $ 1,600 and $ 1,900 an ounce, but so far it had never touched the lower limit, Ibrahim noted. “Looking at the current state of the economy, there is hope that by 2022 world gold prices will be above $ 2,000 an ounce,” Ibrahim told the newspaper. To post November 12.

Also Read: Government Bonds Remain Attractive Investment Option Despite Falling Yields: Analysts

Choosing the right instruments is an important issue for Indonesian investors. In a Standard Chartered Bank survey, nearly 50% of those polled said they rely on investments for their retirement income, and more than 58% plan to retire before age 65.

Andy Nugroho, financial planner at Advisors Alliance Group Indonesia, said gold should not be the only instrument in which to invest. He advised investors to diversify their funds by including other assets to balance risk and return.

Aggressive retail investors able to tolerate higher risk could allocate up to 70% of their portfolio to stocks to maximize returns, followed by 15-20% in gold as a drag in case the capital market collapses . The remaining 10 to 15 percent could go to government bonds.

For conservative investors looking for moderate risk, gold could be stretched to represent 40% of their total portfolio, followed by government bonds at 30-40% and the rest, 20-30% of the portfolio, could go into actions.

Gold is generally viewed as a safe haven for assets during times of economic or political uncertainty, especially when stocks have high valuations and markets expect a correction.

We can hold gold, but [it should not be] so much. Once stocks rebound [after a stock market correction], the price of gold could drop as people switch back to stocks. Gold might not go down, but its price would stagnate, ”Andy told the To post on Nov. 12, adding that markets are currently being fueled by governments’ expectations to curb the pandemic.


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