Gold, the safe haven asset in crises
“Gold, the safe haven in crises” has never been so true. When the economic world seems to be falling apart, when tensions shake finance, investors rediscover the yellow metal. Something that has many advantages: it does not alter over time, it can be stored anywhere, resold in an instant, and at the moment it seems more profitable than bricks. Examples of the crisis-driven gold theory there have been several and in every era.
Of the more recent times three are the most significant: in 2008, when the employees of Lehman Brothers left the company building with their boxes in their hands, starting the Great Recession and the earthquake in the world stock markets, gold took off like a rocket. In 2010, in the midst of the sovereign debt crisis with the countries of southern Europe at the risk of insolvency of its debts the yellow metal started again. And finally in 2020, when the Covid pandemic blocked the world, gold became the safe haven par excellence.
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Gold reached an all-time high of $2,100 an ounce
Now the metal has reached its all-time high with 2100 dollars an ounce, despite apparently no financially explosive situations. It is true that the European economy is growing at a slow pace and the specter of the explosion of real estate in China (a quarter of the country’s GDP) always looms large, but the rest of the world economy that matters does not seem to be doing too badly.
The economy is growing, especially in the United States. The battle against inflation, although not won, gives rise to hope, and the stock markets are experiencing a splendid moment, between the highs of the S&P 500 and the European Eurostoxx 50. So what are the reasons for this gold boom? For analysts, this is happening for several reasons: firstly because the dollar is weakening and secondly because the rally seems to have been driven by speculation in the futures market and not by investors in the asset alone.
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In addition (and probably the strongest reason) the statements of Jerome Powell of the Fed on the possibility of bringing forward interest rate cuts also helped the trend. The 15% increase strengthened with Credit Suisse’s default in March. And then we cannot forget the two wars that seem to have no end, in Israel and Ukraine, and which create destabilization. Obviously the lack of security favors the gold rush.
According to the World Gold Council, one in four central banks plans to increase their gold reserves in the next 12 months. What is certain is that, as with cryptocurrencies now on the rise (Bitcoin at 40,000 dollars), the crystal ball is not sufficient to fully understand the metal trend. Regardless of the obvious speculative reasons and geopolitical instabilities it seems to be quite certain that investors have started to “sniff” that central banks are starting to consider lowering interest rates and this can really favor upward movements.
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