However, gold in yen fared well, mainly driven by heightened demand for hedges.
SEATTLE (Scrap Monster): The latest investment update published by the World Gold Council (WGC) noted that gold delivered 19% returns during the initial six-month period of the current year. This is at a time when major Japanese and global assets witnessed declines. The strong performance by gold was mainly driven by a combination of rising inflation, geopolitical risks and a weaker local currency against dollar.
The Japanese financial markets remained turbulent during H1 2022 due to several factors including negative real economic growth in Q1. The weakness in yen coupled with global geopolitical risks put pressure on local equities. Incidentally, the Japanese yen has depreciated by almost 18% against dollar so far this year.
However, gold in yen fared well, mainly driven by heightened demand for hedges. The gold in yen surged higher significantly by 19% during the initial half of the year. A stronger dollar limited the upside of gold, though, noted WGC report.
The recent strong performance of gold highlights the strategic value of the yellow metal for Japanese investors, even in the midst of yen weakness and global uncertainties. In the event of a possible rise in stagflation risks, gold may become even more attractive to Japanese investors, WGC said.
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