The price of gold has recently risen significantly in the direction of 2000 dollars. What were the key reasons?
The collapse of Silicon Valley Bank and Signature Bank in the United States has triggered a sudden wave of uncertainty about the stability of America’s financial sector. After the rapid deterioration in the situation of the major Swiss bank Credit Suisse, this also spread to Europe. Fears of a larger, systemic banking crisis supported gold prices in two ways: first, US Treasury yields fell sharply, and second, some purchases of exchange-traded funds, gold ETFs, and physical gold as a so-called safe haven asset were seen in North America and Europe recorded.
In your view, are banking crises generally good for gold as an investment?
Yes, very even. As investors, savers and custodians lose faith in the banking system, gold is one of the assets some investors are turning to. That seems to have happened in the past two weeks – and should the banking crisis worsen, it should still lead to heavy investment in gold.
John Reade is Chief Market Strategist at the World Gold Council in London.
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Bild: World Gold Council
What does the Federal Reserve’s latest decision mean for the price of gold?
The Fed hiked interest rates by 25 basis points on Wednesday. In so doing, she acknowledges that she faces two challenges. First, inflation hasn’t gone away and the Fed clearly believes interest rates need to be raised. The second challenge is to bring inflation under control in the midst of a banking crisis, even though the crisis appears to have abated somewhat in recent days.
How is the demand for gold developing fundamentally?
Based on the data we collect daily at the World Gold Council, we have found that investors buy gold through exchange traded funds (ETFs). We also know from discussions with our contacts that the demand for bars and coins in Europe and North America has increased. And we’ve seen a slowdown in buying in key jewelry markets due to price increases.
Are there differences in demand for physical gold and gold ETFs?
In contrast to the past nine months, investors with a preference for physical gold as well as typical ETF investors are currently buying gold. Physical gold buyers have been a strong and consistent market element since the financial crisis and particularly over the past three years. ETF investors, on the other hand, have been more fickle, buying gold in the first 10 months of 2020 following the Russian invasion of Ukraine – but selling on other periods. The current concerns about a banking crisis seem to unite both types of investors.