Gold, a particularly safe asset
A safe haven par excellence, recognized worldwide for centuries as such, the yellow metal has historically been the asset that a large segment of investors turn to when seeking security. Unlike other so-called “risky” assets, gold shows resilience, even resilience during periods of crisis. Just take a look at the price dynamics per ounce, respectively at the beginning of the Covid-19 health crisis and during the first weeks of the Ukrainian conflict.
A shield role in an inflationary period
Although the redefinition of global trade, relocation, the desire to do without Russian gas have caused, among other complex and intertwined causes, a rise in prices that we youngest have never known, it is interesting to wonder about the link between the monetary policy, necessarily restrictive, and the price of gold. However, the Central Banks hold, accumulated between them, a powerful “treasury” of yellow metal reserves, which continues to swell. And this in particular to guarantee a form of independence from the dollar and show confidence towards foreign countries. And the more geopolitical tensions arise – this is obviously the case between the US and China in particular – the stronger the central banks’ demand for gold will be. And the stronger the demand, the more the price of a raw material rises, a fortiori in a stable quantity…
An article in La Tribune dated February 1, 2023 took stock of the year 2022: “Central banks and other sovereign wealth funds have […] bought 1,136 tons of gold (+450 tons), net, the highest volume in 55 years. »
Gold is the guarantee of significant intrinsic value, through an investment free of default risk, as opposed to an investment in bonds or stocks, for example.
We already guessed, then, at this point, the importance of saving in physical gold to protect against inflation, and gain serenity, balancing the portfolio of assets.
What role do euro/dollar fluctuations play for the gold investor?
For more than two years, the euro has been on a downward trend against the dollar, due in particular to differences in the aggressiveness of monetary policy. The underlying trend is even discernible from the high points of 2008, at $1.6038 per euro. Euro, which also suffered during part of last year under perfect parity (less than one dollar for one euro). However, the fall of the single currency tends to raise the price of gold (denominated in euros). When the euro falls against the dollar, the French saver who holds gold automatically benefits…
Let’s review some clichés…
Physical gold is reserved for the elderly: false! It is difficult to resell: false! The entrance ticket is very high: still bad! There are even small formats from one gram of gold, to adapt to all investor profiles. Very liquid and easily accessible to people, the physical gold market has no barriers to entry. Some houses, which have a solid and recognized experience in the trade of precious metals, offer a particularly complete catalogue. For example, it is particularly easy to buy and sell gold at Godot et Fils.
Let’s summarize…
An effective umbrella in times of crisis, a powerful anti-inflationary shield, gold has demonstrated, through its historical character as a safe haven, unbreakable resistance. In the event of bad weather warnings in the financial markets, it is, with the dollar to a lesser extent, one of the rare assets that holds up, even managing, over time, to gain height when conditions, especially monetary ones, are permanently tight. And this particularly in a period of structural and chronic inflation, as we know it today, a situation that has led the main central banks to begin a process of brutal tightening of the monetary faucet, after years of abundant liquidity. This character of an island of protection, which can never be lacking by nature, explains the timeless appeal of gold. A true hedge against inflation, but also against the nervousness of international relations, gold retains an unparalleled attractiveness profile over time.
This content was produced in collaboration with Godot & Fils. The BFM Business editorial team was not involved in the production of this content.
Source: BFM TV
