Investors pile into gold as tensions send demand soaring

Sophia Chen, general manager of San Gold Coins, said that in the past few weeks, the door to their flagship store in Hong Kong had to be repaired twice as dozens of customers tried to come in to stock up on gold coins and bars.

While it is usual for the century-old retailer to post higher sales in the run-up to Chinese New Year, Chen said this time the strong demand was not just seasonal.

"There's been a steady increase (in sales for the past few weeks), because people's perception of gold has changed," she said, noting that soaring gold prices in recent months have encouraged more people to treat gold not just as jewelry but as another asset class to diversify their portfolio.

Across Asia, where the yellow metal is considered not just a store of value but also a heritage asset, consumers have been buying more gold, spurred by a market rally that saw spot gold prices on the New York-based COMEX hitting a record $5,594.82 per ounce on Jan 29.

While profit-taking has pushed down prices to below $5,000 per ounce in February, gold prices have started to rally again this week as the escalating Middle East conflict boosted demand for safe-haven assets.

Two days after the United States and Israel launched airstrikes on Iran, spot gold prices touched $5,400 per ounce during Monday trading.

Swiss bank UBS said on Sunday that investors can allocate a "modest, up to a mid-single-digit percentage" of their total assets to gold to enhance diversification and serve as a buffer against geopolitical risks.

Manav Modi, a commodity analyst at Motilal Oswal Financial Services in Mumbai, said economic uncertainty is pushing investors toward safe havens such as gold.

In India, in January alone, monthly inflows in gold-backed exchange-traded funds, or ETFs, have surpassed equity mutual fund inflows, he said.

This reflects a behavioral change in retail allocation patterns, he added.

"Strong domestic returns have reinforced this trend," he said, noting that gold contracts traded on the Multi Commodity Exchange of India have delivered exceptional gains in recent months.

"Increasingly, investors are investing in gold the way central banks do: as a hedge against currency volatility, inflation shocks and systemic financial risks," he said.

Chen of San Gold Coins said the price rally "attracted a lot of attention, especially among the younger generation".

Purchases by Generation Z have not only boosted her company's sales of gold coins and bars but also silver, another precious metal on an uptrend, but priced cheaper than gold.

"A lot of first-time buyers, when they want to purchase precious metal products for the first time, silver is more price-friendly," Chen said.

prime@chinadailyapac.com