An increasing number of countries are repatriating gold reserves as protection against the sort of sanctions imposed by the West on Russia, according to an Invesco survey of central bank and sovereign wealth funds published on Monday.
India has overtaken China to become the most attractive emerging market for invest in, a study by Invesco Global Sovereign Asset Management stated. The report included views from 142 chief investment officers, heads of asset classes along with senior portfolio strategists from 85 sovereign wealth funds and 57 central banks.
According to a development sovereign based in the Middle East, India is now a ‘better story’ when it comes to business and political stability. The fast-growing demography, good regulation initiatives, and friendly environment for sovereign investors among others.
The report said that India is among countries including Mexico and Brazil which benefit from increased foreign corporate investment aimed at domestic and international demand.
The report added that several emerging markets witnessing an increase in perceived fixed-income attractiveness, including Brazil were expected to overcome inflation and eventually stop tightening and start easing monetary policy.
“At the same time important commodity countries including Brazil and Indonesia were seen as well placed for the green transition and electric vehicle revolution, and thus potentially an important source of diversification for sovereigns with more commodity revenue streams”, the Invesco report added.
Over 85 per cent of the 85 sovereign wealth funds and 57 central banks that took part in the annual Invesco Global Sovereign Asset Management Study believe that inflation will now be higher in the coming decade than in the last.
Gold and emerging market bonds are seen as good bets in that environment, but last year’s freezing of almost half of Russia’s $640 billion of gold and forex reserves by the West in response to the invasion of Ukraine also appears to have triggered a shift.
The survey showed a “substantial share” of central banks were concerned by the precedent that had been set. Almost 60 percent of respondents said it had made gold more attractive, while 68 percent were keeping reserves at home compared to 50 per cent in 2020.
One central bank, quoted anonymously, said: “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.”
Rod Ringrow, Invesco’s head of official institutions, who oversaw the report, said that is a broadly-held view. “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.
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