Against a backdrop of uncertainty and geopolitical tensions, rising oil and commodities prices are stoking inflation rates worldwide.
With oil prices at nearly at their highest levels since 2008, higher inflation rates may drive central banks to raise interest rates in an attempt to absorb the impact on currencies.
Such a situation will definitely prompt investors to rearrange their portfolios and turn to safe havens, namely gold and real estate.
The precious metal has been on the rise since the eruption of the Russia-Ukraine crisis in February, hovering above $2,000 per ounce on the back of rising demand for safe havens.
By definition, gold is a traditional store of wealth.
Demand for gold is forecast to increase this year as central banks raise their reserves of the precious metal.
Corporate and individual investors will stoke demand for gold as well.
The World Gild Council said in its report earlier this month, that central bank gold demand, which rebounded in 2021, may remain an important source of demand.
“There are good reasons why central banks favour gold as part of their foreign reserves which, combined with the low interest rate environment, continue to make gold attractive. This was also evidenced by the fact that two developed market central banks last year joined the list of buyers which has been dominated by emerging market banks since 2010,” the World Gold Council report said.
Swiss franc, yen and US treasuries
A number of currencies like the Swiss franc and Japanese yen will emerge as a good haven from inflationary pressures, especially for corporate investors.
Although an appreciated yen may harm Japanese exporters, fund managers may use the Japanese currency as a medium-term asset.
The Swiss franc is expected to gain slightly. The largest gainer will likely be the greenback as the Federal Reserve increases the interest rate this year.
With growing geopolitical tensions, in addition to Western sanctions on Russia, higher energy prices will likely rub salt into the wound. That would open the door for buying into US treasuries, betting on higher yields.
The US treasuries are forecast to be one of the big winners from the current Russia-Ukraine crisis.
Properties may surge
Properties are an important a store of value against high inflation rates. Prices of land and real estate will likely shoot up in the wake of growing demand for safe havens.
Real estate research JLL said in a report last month that despite the challenging economic backdrop in 2021, Cairo’s commercial real estate sector remained resilient. Around 19,000 residential units were completed in 2021, bringing Cairo’s total residential stock to around 227,000.
According to the JLL report, almost 29,000 units are expected to be delivered in 2022, with most of the projects located towards the east of the city.
“Generally, we saw the launch of new retail projects and higher levels of demand as retail landlords continued to introduce new F&B (food and beverage) concepts in an effort to drive higher footfall and dwell time within their developments,” it said.
All in all, gold and real estate will be on the rise globally and domestically as individuals and corporates seek safe havens from skyrocketing inflation rates emanating from the Russia-Ukraine crisis.
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