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Last Updated : Mar 04, 2014 08:17 PM IST | Source: CNBC-TV18

Gold isn't best hedging asset: Crossbridge Cap

Manish Singh of Crossbridge Capital Llp says the global markets cutting their losses was expected as even the S&P lost less than a percent on Monday, thereby suggetsing that it was still not in a panic mode.

Manish Singh of Crossbridge Capital Llp says neither US, nor Russia has the will or the money to have any military intervention in the Crimea region of Ukraine.

Singh’s views come after Russian president Vladimir Putin ordered troops in central and western Russia to return to their bases, thereby diffusing the standoff between the two countries.

While global markets were on the edge due to this crisis, the fact that markets would cut their losses was in-line with expectation, says Singh.


Speaking to CNBC-TV18’s Ekta Batra and Anuj Singhal, Singh says that the move from equities to other asset classes is not the best bet, especially if one is investing in gold.

“If one goes back in history, even during the Russia-Georgia conflict in 2008, gold actually fell. So, gold is not your best asset to hedge against. most people prefer holding the dollar,” he explains.

The rouble, however, is poised to see some bounce, now that the threat of military action has been lessened significantly.

Below is the edited transcript of the interview.

Anuj: How do you react to this newsflow; the global market seems to be cutting their losses. Do you think any significantly positive news has happened?

A: Russia is calling the troops back which is definitely a positive news. My view has been very clear from the beginning that neither Russia nor US has the will or the money to go ahead and have a fight. So, this is definitely a positive upgrade that we are seeing in terms of the impact on the market.

It is too early to say what the future looks like but overall my reaction is that this definitely a positive news and is inline with expectation what the market was seeing , because yesterday S&P hardly fell by less than a percent which was clear sign that market was not in a panic mode.

Ekta: Will there be some amount of a risk premium that the assets will still trade with or do you think that maybe the Russian currency as well as gold will revert to earlier levels?

A: One saw gold fall partly as well as yesterday when the economic news from US was good. If one goes back to what happened in the Russia-Georgia conflict in 2008, the gold actually fell at that time.

If one has a big conflict going ahead, even gold is not the best bet to be in a safe mode. One generally prefers holding dollar. So, I would not pick gold as an investment or as a hedge against any problem of conflict in Russia.

As far as the rouble and Russian equities are concerned, I would expect that there is going to be some bounce because this is clearly de-escalation from yesterday. With respect to other equities, there will be some doubt. There is no saying that this is over or things have just gone back to normal. So, risk premium will probably be reduced but the risk premium in Russian assets will probably stay the same for a couple of days.

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First Published on Mar 4, 2014 01:42 pm
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