Traditionally, Gold is considered a safe-haven asset due to its high liquidity and low price volatility., that is, during the period of turbulence, investors turned to this precious metal. However, during 2022, when inflation was so high in most countries, gold was worth $1,800 with little movement despite the economic situation. This has led some voices to warn that other assets (including cryptocurrencies) have been stripped of their safe-haven position.

But in 2023, gold has arrived with strength and it seems to be retaining its safe haven function. Bank failures and an even more hidden fear of an economic recession, especially in the US, are forcing the precious metal is close to breaking its all-time highs, which amount to 2070 dollars per ounce. The levels it reached when the coronavirus pandemic impacted financial markets. At the moment, gold has already exceeded $2,000.

So far this year gold has risen in price by more than 12% and costs 2048 dollars.. Gold managed to top $2,000 an ounce in just a few days last month, a level it hasn’t touched in almost a year as it hit $2,003 on April 18, 2022.

The failure of four mid-sized banks in the US, including Silicon Valley Bank, and the collapse and subsequent purchase of Credit Suisse set off a financial earthquake across all sectors. Variable income has been hit hard by these banking crashes. In addition, central banks, both the US Federal Reserve (FRS) and the European Central Bank (ECB), continued on their path of more restrictive monetary policy, meaning they continued to raise rates despite these banking crashes. These decisions show that organizations want to attack inflation regardless of the economic crisis.

Thomas Bollinger, senior investment strategist at J. Safra Sarasin Sustainable AM, notes that gold had a very good month, up more than 8%, driven by banking turmoil and a weak dollar. Therefore, they believe that they prefer catastrophe bonds and gold as an alternative investment.

For his part, Carsten Menke, director of next generation research at Julius Baer, ​​assures us that a rapid change in US monetary policy is “unlikely”, so he adds that “Gold prices moved too fast and too far”. An economic downturn is still avoidable, Menke said, despite “disappointing” economic data that heightened fears of a recession and led to higher gold prices. “The resistance of the economy in the face of aggressive monetary tightening has been very visible. We also do not see the banking turmoil in the US spreading to the wider financial system and triggering another financial crisis. Here,

Investors also take refuge in gold when the dollar falls. Chris Beauchamp, chief market analyst at IG, explains that “gold continues to take every opportunity to rally and the dollar’s decline has resulted in a 12-month high for the commodity.” The theme of the rising dollar in 2022 hit gold the hardest. but “Now that the dollar is out of circulation and inflation is coming down, it looks like it’s time for the metal to shine,” notes Chris Beauchamp.

Benjamin Dubois, head of imposition at Edmond de Rothschild AM, notes that the environment continues to be “particularly favorable” for the precious metal and, in particular, for physical gold, despite the fact that financial turmoil has subsided. Dubois explains that the script is still good because the gold “protection against systemic risk that has not completely disappeared in the short term.” In the words of head Edmond de Rothschild: “The effects of the banking crisis will no doubt be felt for many more months.”

At the same time, the slowdown or even the cessation of the tightening of monetary policy by central banks on both sides of the Atlantic opens up new prospects for the yellow metal. A banking crisis and heightened risk of a recession could prompt central banks to pursue more accommodative monetary policy and slow down their pace of rate hikes. “In a context where inflation remains high, gold should benefit from this change in trend,” Dubois notes.

Finally, Nitesh Shah, director of commodities and macroeconomic analysis at WisdomTree, explains that the main short-term risk for gold at the moment is the point is not that market confidence will quickly recover, but that there will be a general collapse of the market this may encourage the sale of gold to provide liquidity to meet other obligations. “In this case, gold is likely to rise over time as other investors buy the metal to bolster their defensive hedges,” Shah said.