HAMMERED HARD

Geopolitical instability and rate hikes by global central banks have beaten gold hollow

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Since time immemorial gold has been considered as the safest investment option in times of uncertainties, including situations such as rising inflation, geopolitical risks, high interest rates and real negative returns on savings.

Inflation has been steadily rising to alarming levels both in India and overseas. RBI Governor Shaktikanta Das has forecasted that inflation rate in India will hover around 6% in 2022. The annual inflation rate in terms of CPI for India in 2022 is expected to be 7.4%. In fact, for June '22 WPI was a whopping 15.18%, slightly lower, and 15.88% in May this year.

Globally, the US, too, saw its June CPI reach 9.1%, which was a multi-decade high. The war in Ukraine and the resultant sanctions on Russia has crippled the supply of both food and energy, pushing prices of both commodities higher, fuelling inflation world over.

However, hyper-inflation, the war in Ukraine, uncertainty about global growth, warnings of a global recession, negative real interest rates and other issues seem to have no bearing this time around. Contrary to traditional beliefs (gold acts as a hedge against uncertainty and inflation), the yellow metal is acting differently.

WEAKNESS IN GOLD PRICES