The theory goes that crises are the gasoline that fuels gold prices. When Lehman Brothers exploded into pieces in 2008 at the dawn of the Great Recession, and stock markets around the world trembled, its share price rose. When the risk premiums of southern European countries were soaring in the midst of the sovereign debt crisis in 2010, gold rebounded. When the coronavirus pandemic led to fears in 2020 that the economy would go to waste, gold lived up to its status as a safe haven once again and reached new records, becoming the star asset of that year to forget.
Now that level is behind us. Gold surpassed $2,100 an ounce on Monday, its all-time high, in a scenario that lacks the apocalyptic aroma of previous ones. The economy is growing, especially in the United States (although not so much in Europe, and the extent of the housing bubble in China is worrying); the battle against inflation, although not won, gives reason for optimism, and the stock markets are experiencing a splendid moment, with the US S&P 500 index at annual highs after gaining 9% in November, its best month of 2023, and a similar improvement in the European Eurostoxx 50.
Why, then, do investors pour their capital into this precious metal? Experts see several reasons. For Leopoldo Torralba, chief economist at Arcano Partners, the currency market is influential. "It has risen recently mainly because the dollar is depreciating, to compensate for it by transacting mainly in that currency. But in the future, as gold structurally serves to cover inflation, and this is on the right path towards normalization, it is normal that gold will end up having some downward correction in the coming months," he predicts.
Carsten Menke, an analyst at Julius Baer, said: "The recent rally was driven by speculative traders in the futures market and not by safe-haven seekers in the physical market. He believes that Federal Reserve Chair Jerome Powell's remarks on Friday, in which he fueled hopes of sooner-than-expected interest rate cuts, favored the hike.
The 15% year-to-date rally gained momentum with the bankruptcy of Credit Suisse back in March, but was not deflated by rival UBS's bailout of the bank. And it is also fuelled by a tense geopolitical situation due to the conflict between Israel and Hamas, which is coupled with the war in Ukraine, with no end in sight in the short term. That lack of stability traditionally favors gold, though other factors may weigh in. According to a report by the World Gold Council, one in four central banks plan to increase their gold reserves over the next 12 months, which may contribute to their appreciation.
Bitcoin breaks $40,000
The good moment of gold and the stock markets coincides with the rise of cryptocurrencies. Bitcoin has broken the $40,000 barrier for the first time since April 2022, and is already yielding 150% gains for those who bought on Jan. 1. The crypto winter, that period full of hardship that they have gone through in recent months, when problems such as the collapse of TerraLuna or the bankruptcy of the FTX platform accumulated, thus seems to have been left behind for now.
In such a speculative asset, it is not always easy to find reasons for its sharp movements. But in the sector they believe that the upcoming interest rate cut by central banks, and expectations about a future approval of an ETF that will facilitate the entry of new investors, are behind the advances.
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