In uncertain financial situations, it is common to hear the phrase “there is never one cockroach”. This decision is particularly relevant to the current context, since the dissolution of Silicon Valley Bank in the United States and the subsequent release of Credit Suisse, which was absorbed by UBS, show that there are no problems in the banking sector. removed In addition, other midsize banks in the United States are facing financial difficulties, leading to increasing concern that more business will be mixed in the global financial system.
The resolution of the holders of Credit Suisse convertible bonds also generated controversy, since the priority of risk against equities jumped. This caused fear among the hostages, and many fled to the safe haven of goods, such as gold and silver.
Goldman Sachs pointed out in a recent report, “Fear is contagious: the gold margin is growing.” In this uncertain climate, the price of gold has risen nearly 7% in the last two weeks, exceeding $2,000 per ounce for the first time in a year. Let’s remember that in 2022, the price of gold barely changed and remained around $1,820. Silver has also seen a rally in the past two weeks, rising 13% to above $23 per ounce.
Whether or not precious metals will establish themselves as safe-haven assets depends on a number of economic factors, all of which are close to the magnitude of a bank failure. The evolution of the dollar, the evolution of interest decisions of central banks, the opening of China (the main consumer of gold in the world) and the possibility of a difficult approach to the recession, will be the determining factors in the evolution of the fair metal market.
Benjamin Dubois, Head of Hedging at Edmond de Rothschild AM, indicated that the current environment remains mainly in gold, especially physical gold. According to Dubois, “gold is a hedge against systemic risk and the financial consequences will undoubtedly be felt for many months.” It also meant that monetary policy would be more flexible given the risk of a future recession and damage to the banking system, which should benefit gold in an environment where inflation remains high.
Regarding the development of the dollar, Dubois believes that the current environment is less favorable for the US currency, due to its high level, the slowness of the next rate hikes and the ongoing banking crisis.
Gold once again exceeded $2000 an ounce after the US Federal Reserve announced a new rate hike. But not even the precious metal is safe from the high volatility of the market. Right now, given the instability of the stock market and bonds, the precious metal is the only solid relationship that remains