The popularity of gold is on the rise. Traditionally used as a means of portfolio diversification for equity investors, this precious metal is currently benefiting from the turbulence of American and European banks, following the fall of three American banks and the stock market collapse of Credit Suisse, which is weakened and could lose its independence. As a safe haven, gold is benefiting from current concerns about the stability of the financial system.
Gold: a safe haven that remains relevant.
When the economy is uncertain, many investors look for ways to protect their money. Gold is one of the most sought-after assets in such times. Considered a safe haven for centuries, gold offers a stable investment that allows investors to protect their money. Despite the popularity of gold in times of crisis, some investors prefer to turn to other more profitable options in normal times, such as real estate or life insurance.
However, history shows that gold has always been a popular safe haven in times of crisis. In France, for example, during the two oil shocks of the 1970s and 1980s, investors rushed to gold, owning up to 4,600 tons in total. Similarly, during the last major global financial crisis in 2008, many French people sought to protect their money by buying gold.
But gold is not only used to protect money in times of crisis. It can also be used as a long-term investment. In 2011, gold reached a historic value of $1,900 an ounce, but the price of gold fell after the crisis before rising again since early 2016. Today, 73% of French people still consider gold a safe haven.
However, investing in gold is not without risks. Market fluctuations can make gold investments very volatile, and investors must be aware of the risks associated with buying and selling this precious metal. Therefore, it is important to do thorough research and diversify one’s portfolio to minimize risks.
From a fundamental perspective, gold is currently benefiting from the sharp drop in long-term interest rates, amplified by increasing stress in financial markets. This wave of fear favors investments in government bonds at the expense of stocks, which leads to a mechanical increase in government bond prices and thus a decrease in their yield (interest rate). The 10-year US rates have fallen sharply since the beginning of March, dropping from over 4% to 3.4% in just two weeks.
What are the indications provided by technical analysis?
According to this method, which is based on the analysis of past price movements and mathematical indicators in order to build scenarios on the probable evolution of stocks and other financial assets, the crossing of the resistance level of $1,863-$1,864 per ounce allowed for an acceleration of the bullish trend, as expected. In this period of economic and geopolitical tensions, gold is emerging as the preferred safe haven for investors and central banks, leading to a strong increase in demand and therefore its price.
In 2022, following the invasion of Ukraine by Russia, the value of gold bullion had skyrocketed. According to Bullionvault, this increase is linked to the unstable geopolitical context. Since September of the same year, gold prices have increased by 20%, reaching a maximum of 1,840 euros per ounce, which is equivalent to about 60,000 euros for a bullion.
In 2023, gold has once again become a geopolitical issue for central banks, which are displaying an unprecedented demand for the yellow metal, according to France Info. This demand is particularly strong in emerging countries, such as Turkey, Egypt, and Qatar, as reported by Challenges. The combined demand of central banks and investors is causing an increase in the price of gold, which is currently at a peak, although its historical record remains that of August 2020, when the ounce had reached nearly 1,890 euros. At that time, the Covid-19 pandemic had contributed to the rise in the price of the precious metal, as analyzed by Les Echos.