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In uncertain financial situations, the phrase “not a single cockroach” is often heard. This decision is particularly relevant in the current context, as the dissolution of Silicon Valley Bank in the US and the subsequent release of Credit Suisse, which was absorbed by UBS, shows that there is nothing wrong with the banking industry. Adding to this, other mid-sized U.S. banks are also facing financial difficulties, leading to growing fears of more business commingling in the global financial system.
The Credit Suisse convertible bondholders’ resolution also sparked controversy as risk jumped in priority to equities. This aroused fear among the hostages, many of whom fled to safe havens for goods such as gold and silver.
In a recent note, Goldman Sachs noted, “Fear is contagious: Gold margins are growing.” Amid this uncertain climate, gold has rallied nearly 7% in the past two weeks, topping the per-per-month mark for the first time in a year. $2,000 an ounce. Let’s remember that in 2022, the price of gold is little changed and remains around $1,820. Silver has also rebounded over the past two weeks, rising 13% to above $23 an ounce.
Whether the precious metal becomes a safe-haven asset depends on a number of economic factors, all of which approach the severity of a bank failure. The evolution of the U.S. dollar, the evolution of central bank interest rate decisions, the opening up of China (the world’s major gold consumer) and the possibility of tough measures against a recession will be decisive factors in the evolution of gold prices. Fair metals market.
Benjamin Dubois, director of hedging at Edmond de Rothschild AM, said the current environment is still dominated by gold, especially physical gold. According to Dubois, “gold is a hedge against systemic risk, the financial consequences of which will undoubtedly persist for many months.” Flexible, which should benefit gold in an environment of high inflation.
Regarding the development of the U.S. dollar, Du Bois believes that the current environment is not very favorable for the U.S. dollar due to the high U.S. dollar, the slowness of the next rate hike and the ongoing banking crisis.
After the Federal Reserve announced a new round of interest rate hikes, gold once again broke through $2,000 an ounce. But even precious metals are not immune to wild market swings.For now, the precious metal is the only solid relationship that remains, given the volatility in stocks and bonds
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