24 November 2023

Gold bars, in Paris, July 29, 2020.

IMercury rises and gold heats up. Since March, the yellow metal has benefited from the buying fever of cautious investors. In mid-April, they boiled the speculative crucible and the ounce of gold exceeded the bar of 2,000 dollars (1,800 euros). A level close to the near-historical record reached in March 2022, when Russia’s invasion of Ukraine set the markets on fire. Currently, the price has fallen by one degree, but is still close to the peaks, at nearly 1,980 dollars.

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Gold is out of the ordinary. For now, the common lot of amenities is rather to nose dive. The price of wheat fell below 240 euros per ton, cutting the grass under the feet of grain farmers. A year ago, it was displayed at 370 euros. That of rapeseed fell flush with the daisies, dropping from 750 to 440 euros. While many commodities are encumbered in the markets, gold seems spring-loaded.

These divergent trajectories are perfectly illustrated by looking at the respective curves of black gold and yellow metal. A barrel of Brent from the North Sea, for delivery in June, is trading around 78 dollars. Its price had even retreated to a level close to 71 dollars in March. To be compared to the 120 dollars spent a year earlier to afford a barrel of black gold. The blow of pump of the rough in March was explained by the successive shocks caused by the setbacks of the Silicon Valley Bank, then the rescue in breaststroke of Credit Suisse.

Hoarding

Reflecting the nervousness of investors, the sudden banking crisis immediately caused oil to plunge and gold to rise. Every signal giving an indication of global economic health is interpreted by the markets. Rate hikes by the US Federal Reserve, questions about a return to more sustained growth in China, freed from the brakes of its anti-Covid policy, fears of a recession or the monitoring of inflation are all arguments that weigh in the balance and give rise to variations and divergence. Depending on whether they are willing to take risks or not, investors will favor oil or gold.

For the most anxious, the yellow metal retains its status as a safe haven. Especially since the geopolitical context, from the war in Ukraine to the tensions between China and Taiwan, is not the most peaceful. Today, holders of ingots or napoleons tell themselves that they are all good.

Even if this investment does not bring them any interest, the valuation of gold transforms their woolen stockings into silk tights. A tights that they hope especially resistant to possible bank failures or other monetary devaluations. But individuals are not alone in hoarding the yellow metal. Central banks also tend to buy gold, at an unprecedented rate. Their coffers are full of ingots. Valuable hard and stumbling assets if the economy were to trip over the carpet…

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