Bitcoins <\/p>\n
While the Cen\u00adtral Bank cur\u00adrent\u00adly holds around US$163 mil\u00adlion in gold re\u00adserves as at the end of De\u00adcem\u00adber 2024, with mount\u00ading eco\u00adnom\u00adic and geopo\u00adlit\u00adi\u00adcal un\u00adcer\u00adtain\u00adties, T&T\u2019s banker to the Gov\u00adern\u00adment and reg\u00adu\u00adla\u00adtor of fi\u00adnan\u00adcial in\u00adsti\u00adtu\u00adtions ought to se\u00adri\u00adous\u00adly con\u00adsid\u00ader ex\u00adpand\u00ading these hold\u00adings, giv\u00aden gold\u2019s ef\u00adfec\u00adtive\u00adness as a hedge against eco\u00adnom\u00adic in\u00adsta\u00adbil\u00adi\u00adty, econ\u00ado\u00admist Dr Valmik\u00adki Ar\u00adjoon told the Sun\u00adday Busi\u00adness Guardian. <\/p>\n
He not\u00aded that the price of gold in\u00adcreased by 90 per cent from the end of 2019 to present, from US$1,582 to US $3009 per once.<\/p>\n
Stat\u00ading that gold is wide\u00adly re\u00adgard\u00aded as a safe-haven as\u00adset, par\u00adtic\u00adu\u00adlar\u00adly dur\u00ading times of eco\u00adnom\u00adic un\u00adcer\u00adtain\u00adty, and un\u00adlike for\u00adeign cur\u00adren\u00adcies, stocks, and bonds \u2013 which of\u00adten lose val\u00adue dur\u00ading mar\u00adket dis\u00adrup\u00adtions, gold typ\u00adi\u00adcal\u00adly re\u00adtains its val\u00adue and even ap\u00adpre\u00adci\u00adates, Ar\u00adjoon is ad\u00advis\u00ading this is es\u00adpe\u00adcial\u00adly im\u00adpor\u00adtant for cen\u00adtral banks like T&T\u2019s, which hold large re\u00adserves of as\u00adsets like bonds and for\u00adeign cur\u00adren\u00adcies, par\u00adtic\u00adu\u00adlar\u00adly the US dol\u00adlar. <\/p>\n
Dur\u00ading pe\u00adri\u00adods of eco\u00adnom\u00adic stress, when bond prices fall or cur\u00adren\u00adcies de\u00adpre\u00adci\u00adate, gold ris\u00ades in val\u00adue as in\u00advestors and cen\u00adtral banks flock to buy this safe-haven as\u00adset, he added.<\/p>\n
\u201cThis in\u00adverse re\u00adla\u00adtion\u00adship means that gold can off\u00adset loss\u00ades in the val\u00adue of oth\u00ader fi\u00adnan\u00adcial as\u00adsets like bonds and forex, pro\u00advid\u00ading a cru\u00adcial buffer that sta\u00adbilis\u00ades cen\u00adtral banks\u2019 over\u00adall re\u00adserve port\u00adfo\u00adlios. <\/p>\n
\u201cThe re\u00adserves we cur\u00adrent\u00adly hold are not large enough and by not ex\u00adpand\u00ading our hold\u00adings years ago, we missed op\u00adpor\u00adtu\u00adni\u00adties to for\u00adti\u00adfy our fi\u00adnan\u00adcial po\u00adsi\u00adtion and mit\u00adi\u00adgate the desta\u00adbil\u00adis\u00ading ef\u00adfects of shocks like volatile en\u00ader\u00adgy prices, the COVID pan\u00addem\u00adic, and geopo\u00adlit\u00adi\u00adcal ten\u00adsions \u2013 all of which have un\u00adder\u00adscored the im\u00adpor\u00adtance of hold\u00ading gold as a strate\u00adgic re\u00adserve as\u00adset as part of a di\u00adver\u00adsi\u00adfied port\u00adfo\u00adlio. <\/p>\n
\u201cGreater hold\u00adings would have placed us in a far stronger po\u00adsi\u00adtion to with\u00adstand fi\u00adnan\u00adcial shocks and pre\u00adserve eco\u00adnom\u00adic sta\u00adbil\u00adi\u00adty,\u201d Ar\u00adjoon ex\u00adplained.<\/p>\n
In the last year, he not\u00aded, cen\u00adtral banks glob\u00adal\u00adly sig\u00adnif\u00adi\u00adcant\u00adly in\u00adcreas\u00ading their gold hold\u00adings, pur\u00adchas\u00ading over US$96 bil\u00adlion worth. The largest buy\u00aders were Turkey, Poland, In\u00addia, and Chi\u00adna, caus\u00ading gold prices to soar by 52 per cent in that pe\u00adri\u00adod. <\/p>\n
The pri\u00adma\u00adry rea\u00adson for these pur\u00adchas\u00ades, Ar\u00adjoon said, was to in\u00adsu\u00adlate their coun\u00adtries fi\u00adnan\u00adcial\u00adly from the geopo\u00adlit\u00adi\u00adcal ten\u00adsions caused by the war in Ukraine, as cen\u00adtral banks sought to re\u00adbal\u00adance re\u00adserves away from US dol\u00adlar as\u00adsets.<\/p>\n
\u201cIn\u00addeed, gold pur\u00adchas\u00ades con\u00adtin\u00adue to es\u00adca\u00adlate due to un\u00adcer\u00adtain\u00adties caused by im\u00adpend\u00ading US tar\u00adiffs and pos\u00adsi\u00adble trade wars. Like many oth\u00ader cen\u00adtral banks, it is im\u00adpor\u00adtant for us to proac\u00adtive\u00adly di\u00adver\u00adsi\u00adfy our re\u00adserves by ac\u00adquir\u00ading gold, which can help safe\u00adguard us against eco\u00adnom\u00adic fall\u00adout stem\u00adming from these tar\u00adiffs. <\/p>\n
\u201cThere is a pos\u00adsi\u00adbil\u00adi\u00adty that the tar\u00adiffs could send the US in\u00adto a re\u00adces\u00adsion by dri\u00adving up busi\u00adness costs, slow\u00ading pro\u00adduc\u00adtion, low\u00ader\u00ading prof\u00aditabil\u00adi\u00adty, and re\u00adstrict\u00ading firms\u2019 abil\u00adi\u00adty to hire work\u00aders. Tar\u00adiffs may al\u00adso trig\u00adger stagfla\u00adtion\u2014a com\u00adbi\u00adna\u00adtion of re\u00adces\u00adsion with ris\u00ading prices\u2014fur\u00adther in\u00adten\u00adsi\u00adfy\u00ading US eco\u00adnom\u00adic pres\u00adsures,\u201d Ar\u00adjoon said.<\/p>\n
Such out\u00adcomes, he said, could in\u00adtro\u00adduce sig\u00adnif\u00adi\u00adcant volatil\u00adi\u00adty in the val\u00adue of the US dol\u00adlar and fi\u00adnan\u00adcial mar\u00adkets adding, \u201cAl\u00adready, we are see\u00ading stock prices de\u00adclin\u00ading with each tar\u00adiff an\u00adnounce\u00adment by Pres\u00adi\u00addent Trump, while gold prices si\u00admul\u00adta\u00adne\u00adous\u00adly rise as cen\u00adtral banks and in\u00advestors turn to gold to shield them\u00adselves from trade-re\u00adlat\u00aded risks.<\/p>\n
\u201cOur re\u00adserves are heav\u00adi\u00adly con\u00adcen\u00adtrat\u00aded in US trea\u00adsuries and the US dol\u00adlar, and while it re\u00admains the glob\u00adal re\u00adserve cur\u00adren\u00adcy, we risk over\u00adre\u00adliance on a sin\u00adgle cur\u00adren\u00adcy, leav\u00ading us ex\u00adposed to the ef\u00adfects of a po\u00adten\u00adtial US cur\u00adren\u00adcy de\u00adpre\u00adci\u00ada\u00adtion par\u00adtic\u00adu\u00adlar\u00adly if a re\u00adces\u00adsion oc\u00adcurs.\u201d <\/p>\n
Ar\u00adjoon fur\u00adther not\u00aded this would di\u00admin\u00adish the pur\u00adchas\u00ading pow\u00ader of this coun\u00adtry\u2019s for\u00adeign re\u00adserves, re\u00adduc\u00ading its abil\u00adi\u00adty to pro\u00adtect against eco\u00adnom\u00adic shocks. <\/p>\n
How\u00adev\u00ader, he em\u00adpha\u00adsised in\u00adcreas\u00ading T&T\u2019s gold re\u00adserve hold\u00adings would ef\u00adfec\u00adtive\u00adly hedge against this risk, as gold is like\u00adly to ap\u00adpre\u00adci\u00adate rather than lose val\u00adue un\u00adder such con\u00addi\u00adtions.<\/p>\n
He added this can help pre\u00adserve the val\u00adue of the HSF dur\u00ading mar\u00adket down\u00adturns, as gold prices typ\u00adi\u00adcal\u00adly rise dur\u00ading pe\u00adri\u00adods of eco\u00adnom\u00adic un\u00adcer\u00adtain\u00adty when stock and bond prices de\u00adcline.<\/p>\n
Cap\u00adi\u00adtal ar\u00adbi\u00adtrage<\/p>\n
Econ\u00ado\u00admist Dr Vanus James echoed sim\u00adi\u00adlar sen\u00adti\u00adments that in terms of cap\u00adi\u00adtal gains or growth of as\u00adset val\u00adue pre\u00adcious met\u00adals have been per\u00adform\u00ading ad\u00admirably in the last decade.<\/p>\n
But what do they sug\u00adgest as an in\u00advest\u00adment strat\u00ade\u00adgy of a coun\u00adtry like T&T? <\/p>\n
Should the coun\u00adtry now rush to in\u00adclude them in the port\u00adfo\u00adlio of its sov\u00ader\u00adeign wealth fund \u2013 the Her\u00aditage and Sta\u00adbil\u00adsa\u00adtion Fund (HSF)? <\/p>\n
Should the Cen\u00adtral Bank hold a sub\u00adstan\u00adtial share of its of\u00adfi\u00adcial re\u00adserves in gold?<\/p>\n
James said in the nor\u00admal process of cap\u00adi\u00adtal ar\u00adbi\u00adtrage an in\u00advestor can pur\u00adsue three dif\u00adfer\u00adent types of re\u00adturns:<\/p>\n
1. One is the rel\u00ada\u00adtive\u00adly safe (low risk) in\u00adter\u00adest rates of\u00adfered by in\u00advest\u00adment in pa\u00adper \u2013 bonds, bills, mon\u00adey mar\u00adket funds, and the like;<\/p>\n
2. An\u00adoth\u00ader is the some\u00adwhat more risky (more volatile) as\u00adset growth, the kind of cap\u00adi\u00adtal gains that made the pre\u00adcious met\u00adals at\u00adtrac\u00adtive in\u00advest\u00adments in the last two decades and that now make the cryp\u00adtocur\u00adren\u00adcies even more promis\u00ading; and<\/p>\n
3. The third type of re\u00adturn is the prof\u00adit rate, and this comes from in\u00advest\u00adment in as\u00adsets that on\u00adly yield a re\u00adturn through the bat\u00adtle of com\u00adpe\u00adti\u00adtion for pro\u00adduc\u00adtiv\u00adi\u00adty growth and cost cut\u00adting, and hence main\u00adly through in\u00adno\u00adva\u00adtion and in\u00adsti\u00adtu\u00adtion\u00adal re\u00ador\u00adgan\u00adi\u00adsa\u00adtion of pro\u00adduc\u00adtion of val\u00adue.<\/p>\n
James added that all forms of re\u00adturns will val\u00adi\u00addate the un\u00adder\u00adly\u00ading in\u00advest\u00adment and en\u00adable growth of sav\u00adings and wealth.<\/p>\n
How\u00adev\u00ader, he not\u00aded, it is this third type of re\u00adturn and as\u00adso\u00adci\u00adat\u00aded sav\u00adings that is as\u00adso\u00adci\u00adat\u00aded with a coun\u00adtry\u2019s ca\u00adpac\u00adi\u00adty to re\u00adstruc\u00adture its econ\u00ado\u00admy, main\u00adly by shift\u00ading to pro\u00adduc\u00adtion, ex\u00adport, and em\u00adploy\u00adment of cap\u00adi\u00adtal goods and ser\u00advices.<\/p>\n
\u201cIt is this that takes ad\u00advan\u00adtage of prospects for grow\u00ading the qual\u00adi\u00adty of jobs, in\u00adcreas\u00ading the knowl\u00adedge and skills of work\u00aders, and in\u00adcreas\u00ading the speed of learn\u00ading on the job that con\u00adtin\u00adu\u00adal\u00adly grows the rate of prof\u00adit,\u201d James said.<\/p>\n
He not\u00aded that among these prospects is the like\u00adli\u00adhood that the re\u00adal wage will grow more slow\u00adly than labour pro\u00adduc\u00adtiv\u00adi\u00adty, whether mar\u00adgin\u00adal or av\u00ader\u00adage.<\/p>\n
\u201cSo, it is al\u00adso this type of in\u00advest\u00adment that grows a coun\u00adtry\u2019s ca\u00adpac\u00adi\u00adty to gen\u00ader\u00adate an ever-grow\u00ading stan\u00addard of liv\u00ading for an in\u00adcreas\u00ading num\u00adber of work\u00aders and cit\u00adi\u00adzens, while catch\u00ading up with the ad\u00advanced economies of the world.<\/p>\n
\u201cWhat is more, this type of in\u00advest\u00adment al\u00adso en\u00adables rapid elim\u00adi\u00adna\u00adtion of the un\u00adder\u00adcap\u00adi\u00adtal\u00adi\u00adsa\u00adtion of work, un\u00adder\u00adem\u00adploy\u00adment, ex\u00adces\u00adsive re\u00adliance on a sin\u00adgle for\u00adeign ex\u00adchange earn\u00ader and as\u00adso\u00adci\u00adat\u00aded re\u00adpeat\u00aded short\u00adages of for\u00adeign ex\u00adchange to pur\u00adchase nec\u00ades\u00adsary im\u00adports,\u201d James said.<\/p>\n
Thus, he added, if a coun\u00adtry finds it\u00adself with the cur\u00adrent prob\u00adlems and re\u00adsource con\u00addi\u00adtions of Trinidad and\/or To\u00adba\u00adgo, its best choice in the process of cap\u00adi\u00adtal ar\u00adbi\u00adtrage is to pur\u00adsue in\u00advest\u00adment that yields prof\u00adits.<\/p>\n
\u201cThe oth\u00ader two op\u00adtions can pro\u00advide some self-in\u00adsur\u00adance and im\u00adport cov\u00ader, as does the HSF and the of\u00adfi\u00adcial re\u00adserves, but they promise on\u00adly growth with\u00adout de\u00advel\u00adop\u00adment,\u201d James ex\u00adplained.<\/p>\n
He fur\u00adther not\u00aded that with the re\u00adcent his\u00adto\u00adry that promis\u00ades high cap\u00adi\u00adtal gains af\u00adter ad\u00adjust\u00ading for risk, the pre\u00adcious met\u00adals might be good can\u00addi\u00addates for con\u00adsid\u00ader\u00ada\u00adtion by the man\u00adagers of the port\u00adfo\u00adlio of the HSF, adding that even the Cen\u00adtral Bank might wish to con\u00adsid\u00ader those cap\u00adi\u00adtal gains when mulling the forms in which to hold the of\u00adfi\u00adcial re\u00adserves of for\u00adeign ex\u00adchange.<\/p>\n
How\u00adev\u00ader, he said man\u00adagers of the na\u00adtion\u00adal cap\u00adi\u00adtal ar\u00adbi\u00adtrage process would do well to note that adop\u00adtion of a na\u00adtion\u00adal port\u00adfo\u00adlio that em\u00adpha\u00adsis\u00ades growth with\u00adout de\u00advel\u00adop\u00adment would be a mas\u00adsive mis\u00adtake at this time.<\/p>\n
BOX<\/p>\n
On whether the bank should ex\u00adpand the HFC port\u00adfo\u00adlio to in\u00advest in gold, T&T\u2019s Cen\u00adtral Bank stat\u00aded, \u201cThe Cen\u00adtral Bank man\u00adages the Her\u00aditage and Sta\u00adbil\u00adi\u00adsa\u00adtion Fund in ac\u00adcor\u00addance with the Her\u00aditage and Sta\u00adbil\u00adi\u00adsa\u00adtion Fund Act, 2007 and the op\u00ader\u00ada\u00adtional and in\u00advest\u00adment guide\u00adlines de\u00advel\u00adoped by the Board of Gov\u00ader\u00adnors.\u201d<\/p>\n
The Her\u00aditage and Sta\u00adbil\u00adi\u00adsa\u00adtion Fund is a sov\u00ader\u00adeign wealth fund es\u00adtab\u00adlished in March 2007 by the Gov\u00adern\u00adment. It was pre\u00advi\u00adous\u00adly known as the In\u00adter\u00adim Rev\u00adenue Sta\u00adbil\u00adi\u00adsa\u00adtion Fund, set up in 2000. <\/p>\n<\/div>\n