Decades have been applied for the rule – when the interest rates rise in the USA, investors sell gold and transition to US government bonds due to higher yields.
But that connection was cracked in February 2022, when Western countries have frozen the foreign currency reserves of the Central Bank of Russia, in response to Ukraine invasion. It is, as Lina Tomas, Strategist for Commodity Investments in Goldman Sachs, was a “call for awakening”: if assets such as American bonds or euros can be frozen by a politician – then no longer safe.
Goldman Sachs states that Russia carefully withdrew gold reserves from abroad, anticipating a scenario like this. But this is not just a Russian problem – freezing the funds undermines the global financial system, says Tomas in a conversation for the Energy Investment Consortium Veriten, investor me.
Due to distrust in the US ability to control the trillion deficits, government bonds are no longer what they used to be. That is why more and more central banks around the world increase gold reserves.
Before the war in Ukraine, the central banks were purchased on average 17 tons of gold per month. After 2022. That average increased to 22 tons, and from the beginning of this year – as many as 94 tons per month.
China, the world’s largest manufacturer of gold that limits exports, aims to make gold 20% of foreign currency reserves. Russia, another manufacturer and leading exporter, uses demand to place gold through countries such as Armenia and Kazakhstan.
Goldman Sachs estimates that the wave of the purchase of central banks will take at least another two years, which could push the price of ounces gold and up to $ 4,000 – about 30% more than the current price of about $ 3,400.
Many banks store gold in Switzerland due to developed storage infrastructure. As the price grows, it becomes cheaper to store it – for the same amount of money it takes less physical gold.
Will this trend turn around if the peace goes out? A little probably, Tomas says, which is a doctorate in Harvard exploring the dollar as a safe currency. “Once you cross Rubicon, there is no back,” explains. No decades are needed for investors to gain trust again and reduce the exposure to gold.
And replacing gold? Bitcoin? Silver? Oil?
Daan Strouven, one of the heads of research in Goldman Sachs, says risk analysis and benefits still favoring gold. Both Bitcoin and gold records growth in recent years, but due to the limited offer, gold provides greater safety to those who fear inflation caused by the money by printing money.
Bitcoin is more volatile, more sensitive to falls and connected to the shares of technological companies. If you are looking for protection from falling actions, gold is a better choice – has a minor correlation and lower volatility, concludes a stream.
New gold reserves are difficult to detect – miners every year increase the amount of gold in circulation in circulation for only 1%.
Oil?
As for the oil, Goldman predicts that the price of American crude oil will by mid 2026. Fall to about $ 50 per barrel due to the growth of offer and weak demand.
Silver?
Thomas lists three reasons why silver is not a good choice: dark, degrades, is much cheaper and physically impractical – the transport of the truck is needed. Also, the central banks do not hold it – not recognized as spare assets or by the IMF.
The gold market consists of only 0.5% of the stock market value. Therefore, small shifts in capital allocation have a huge impact on the price.
If all this still doesn’t work comparable to you – Get “Blue Chip” action. However, the S & P 500 index is expressed in gold grams, from 2022. It fell 30%, with 83 to only 58 grams.
