Safe haven: Will the corona crisis set a new gold price record? | message

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Due to economic concerns triggered by the corona pandemic, the gold price broke the $ 1,700 mark on Tuesday, climbing to a seven-year high. In euro, a record level was even reached on Tuesday morning. But the US dollar quotes are more important. Here too, the yellow precious metal could reach new heights.

Memories of the 2008 financial crisis

Despite its reputation as a “safe haven”, gold also suffered price losses at the beginning of the corona crisis. But unlike stocks, it has now been able to make up for these losses. This is because these losses were not caused by waning investor confidence, but only emergency sales by investors who were asked by their banks to provide additional liquidity for their securities-backed loans.

Already during the financial crisis in 2008 there had been a very similar development: the gold price had initially fallen, then rose in the following years and even reached a new record high of around $ 1,900 per troy ounce in 2011. And there are numerous reasons that speak for a further rise in the gold price.

High gold demand

The fact that gold has not lost its status as a “safe haven” can also be seen from the strong demand. According to the “World Gold Council”, stocks of gold ETFs reached a record high at 3,185 tons at the end of March. This strong interest in the yellow precious metal supports the gold price.

The desire for security is currently very strong – and very understandable. Because even if there is currently the impression that the peak of the epidemic has been overcome in China and that new infections are also declining in many European countries, the uncertainty surrounding the corona crisis remains extremely high. On the one hand, the global economy is still far from a normal state, on the other hand, a second wave of diseases cannot be ruled out.

US Fed Actions Support Gold Price

The corona crisis has hit the economies of numerous countries hard in recent weeks. Shops had to close and factories shut down. In order to at least alleviate the economic consequences, the US Federal Reserve has decided, among other things, to expand its bond purchases.

This has a negative impact on nominal interest rates. This, along with a rise in inflation expected by economists – triggered by the enormous flood of money – is likely to depress real interest rates. Low or even negative real interest rates support the gold price, because gold then becomes more attractive compared to other forms of investment such as US government bonds.

Setbacks possible

But even if there is currently much to be said for a further rise in the gold price, temporary setbacks cannot be ruled out. If there were to be a further deep slump in the stock market, this could possibly force further investors to sell their gold holdings in an emergency in order to plug holes in their stock transactions.

Editorial office finanzen.net