RIO DE JANEIRO, BRAZIL – If a meteor were to fall on Earth, it is possible that shares, real estate, and even money as we know it today would no longer have any value. But one object probably would: a gold bar.
Considered a precious metal for millennia, gold is still viewed as a safe haven, particularly in times of economic instability. Last month alone, when humankind faced one of the most critical moments of the coronavirus pandemic, the commodity price soared by 6.41 percent. But as it is traded in dollars, in Brazilian real its high was even higher, at 11.94 percent. In the year to date, gold has accumulated an appreciation of 12.75 percent in dollars and 45.8 percent in reais.
“The demand for gold usually increases when there is some world crisis or a trade war between two great powers, as happened last year,” said Mauriciano Cavalcante, Ourominas’ foreign exchange manager. Since the start of 2019, gold has increased 34 percent in dollars and 86.7 percent in Brazilian reais.
This is where the investment funds tied to gold are riding — with highs of more than 40 percent, they are among the most profitable of the year. The Orama Gold, which has existed since 2008, has already exceeded its largest annual high in history, with an accumulated yield in 2020 of 44 percent by the end of April.
Despite the recent positive performance, the asset is more advisable for the protection of more aggressive positions than for the long-term profit. “Gold does not generate income. When the situation normalizes, gold funds will likely have a negative yield,” said Hugo Daniel de Azevedo, commercial superintendent of B2C at Orama.
According to Azevedo, the asset allocation in the portfolio should vary according to each investor’s profile, and not everyone should buy gold. “I would not recommend Orama Gold to 100 percent of our clients, only to those with better balanced portfolios”.
Created in September last year, the assets of Vitreo Ouro, the gold-backed fund of the Vitreo fund manager, increased 651 percent between January and April this year, evidencing the high demand “We created the gold-backed fund to protect the small investor,” said George Wachsmann (Jojo), Vitreo’s founding partner.
In addition to the search for security, Jojo also sees gold benefit from declining interest rates worldwide. “In moments of excess liquidity, the markets go after real assets. Lands rise in price, stocks double in price, and gold also follows this trend”, he said.
The funds emerged as an alternative to the stock market, where it is possible to buy gold in the fractional market, starting at 0.250 grams, or in the standard lot, with 250 grams, which allows the withdrawal of gold in kind (although the practice is uncommon) and, today, is around R$75,000. Despite its low liquidity, the deal can be conducted through brokerage houses and home brokers.
In addition to the stock market and the investment funds linked to the commodity, which accept investments of R$ 1,000 or more, another way of buying and selling gold is through the over-the-counter market, which trades the metal physically. In this case, the deal is usually closed in brokerage shops licensed by the Central Bank and the Securities and Exchange Commission. “They buy the gold and take it home,” said Mauriciano Cavalcante.
In this case, it is possible to buy and sell gold, in weithts as small as one gram, the equivalent of about R$300. Despite the risks inherent in carrying the metal, liquidity is immediate.
Source: Exame