The geopolitical tension between Russia and Ukraine has had a significant impact on financial markets and commodities across the globe, especially on oil. This volatility created some uncertainty, but this was an opportune time for investors to think of strategic ways to diversify their investment exposure through gold and Krugerrands to help create a safe-haven in their investment journey.
Physical commodities are used by investors to spread portfolio risk, as certain commodities do not move in tandem with the equity market. One such commodity is gold, which is an advisable diversification tool for investors to turn to in times of market uncertainty as it helps protect their investments from unfavourable market movements.
“Diversification means investing in assets whose returns do not move in the same direction or assets with returns that are negatively correlated. Returns on gold do not move with the market and at times of market stress usually moves in the opposite direction, making it a very useful tool when looking to spread risk in a portfolio,” says Samukelo Zwane, Head of Product at FNB Wealth and Investments.
He adds that “there are several investment options available for an investor to obtain exposure to gold. An investor can invest in shares of companies which mine gold, gold exchange-traded funds and directly through Krugerrands. The value of Krugerrands is directly linked to the value of gold and in times of uncertainty or inflation, gold is seen a natural investment safe-haven and hedge against inflation.”
Gold has seen a significant increase in value due to the current Russia–Ukraine conflict and investors have the option of taking delivery of the Krugerrands they purchase or hold in custody with FNB Wealth and Investments to help manage their portfolio for added safety and peace of mind, all deliveries of Krugerrands are insured in transit.”
Zwane adds that “We offer investors the option of taking delivery or holding their Krugerrands in custody with FNB. If clients wish to hold their Krugerrands with FNB, they can buy, sell and manage their Krugerrands on our App or online banking.”
“We know and understand that investors are always looking for alternative ways to protect their investments from future market events. One thing that comes to light in a market event is the role diversification plays in sheltering investors from total losses. However, with an unexpected event like the pandemic or the Russia- Ukraine conflict we are currently impacted by any weakness in a diversification strategy is magnified. Therefore, investing in Krugerrands will create diversification in the portion and reduce downside drawdown of the portfolio,” concludes Zwane.
Krugerrands can be purchased through FNB. Investors coins will be stored safely at Rand Refinery. Further to this, if your coins are stored with Rand Refinery, FNB guarantees to buy back your Krugerrands at any time, making this an extremely liquid asset that can easily be converted to cash.