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While “safe” gold and “risky” actions go up at the same time, the value of gold, as a safest bet in times of turbulence, may be decreasing.
The price of gold It reached a maximum historical in April and now remains close to this value. Conventional investment wisdom puts gold as an asset of “Porto-Seguro” – For which investors go in times of crisis by abandoning greater risk assets such as actions.
However, in August, the scholarship index S&P 500 It has also reached a historical maximum and, like gold, it also remains close to that value.
Historically, those who accompany these markets would have expected the prices of gold and actions to move in opposite directions. This typically produced the effect of “coverage” of gold – would compensate for losses (and gains) of actions.
But while “safe” gold and “risky” actions go up at the same time, the gold value as a safest bet in times of turbulence may be decreasing.
It is the analysis by expert David McMillan, professor of finance at the University of Stirling (United Kingdom), in an article no.
Looking at the price of gold historically shows that:
- rose in response to oil price shocks in the 1970s, when the global economy was moving towards recession
- It fell during the late 1990s, when shareholder markets thrived, and as the global economy recovered after 2009.
But from that point, it has shown a largely common trajectory to actions.
In a study to be published in the September edition of Global Finance Journal, in which McMillan was involved, several reasons were analyzed for which these were analyzed traditionally opposite forces have been converging – and to cause the Disvalling the effect of Porto-Seguro do Ouro.
At this time, the global economy is emerging from a period of high inflation and high interest rates. Central banks are reducing interest rates (with more expected cuts), which will encourage household consumption and business investment.
Economic growth statistics are generally evolving positively, such as business profits. And there is a positive feeling within the economies about the potential of artificial intelligence and its role in growth and productivity. Together, these factors explain the climb of shareholder markets.
But the geopolitical risksEspecially involving the invasion of Ukraine by Russia and the tensions in the Middle East (specifically Iran and attacks by the Red Sea Houthis), they are causing concern for actions and the economy in general. Both may have significant effects on major international goods (such as oil and food prices).
And there is also risk from trade policies of the US President Donald Trump. This is especially true given its character unpredictablewith increased and then suspended rates before being reinstated at different levels than previously announced.
Both these hostilities and Trump’s trade policies create risk and uncertainty within the international economy. This would explain why investors can consider buying gold-making it more valuable.
However, McMillan points out, this does not fully explain why he is being so sought after and negotiating close to his maximum historical. To understand it, considers the expert, we need to look a little further back.
Increasing demand
After the burst of the technology bubble in the early 2000s, goods such as gold began to be treated (and transacted) as other financial assets. Fundamental to this was the development of Bolsa Funds (ETFS)with the first Gold ETF released in 2004. These allow investors to essentially buy a participation in gold.
Since then, the number of gold ETFs has increased dramatically, especially after the global financial crisis. Currently, gold can be traded like any other assets and can become a fixed element on investment portfolios. THE Search for these funds has been shooting recently.
In addition, o. It currently acts as a reserve currency for central banks and as a vehicle for trade and international payments, including for major goods. But some countries have increasingly questioned this situation whenconsidering whether they should negotiate goods such as oil in their own coins.
Trump, and the uncertainty it causes, only makes these appeals stronger. As such, these Questions about the Dollar Statute led central banks to buy more gold as an alternative reserve asset.
Since the end of the global financial crisis in 2009 and especially over the past ten years, gold has greatly followed the same path as actions. Although there is always deviations, this means, in practice, the end of gold as coverage of port-seguro against declines of the stock price.
Gold is now firmly established as another investment asset, along with actions, obligations and other goods. This means that nowadays its investment role is as part of a diverse portfolio and not as a coverage.
However, it is important to mention that this does not mean that gold has lost its appeal. Its limited offer and desirability for both jewelery and industry are rare and valuable attributes. And with its intrinsic value recognized around the world, gold is likely to remain sought.
