September 30, 2022

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Market fluctuation may not be visible haven with gold

4 min read

In the year the price of gold is at its lowest level and its role as a refuge during the current geopolitical and world market volatility has given way against the dollar, which has visibly strengthened.

Gold has usually functioned as a refuge for investors in the face of major events such as economic and financial collapses, wars or sharp falls in world stock markets, and that role became evident in 2020, the year in which the world began to experience the pandemic, as its price increased about 25%.

The precious metal in 2021 began to lose some of its shine, with a decrease in its price of 3.5%, and this year the drop in its price reaches 3%.

The regular moment that the price of gold is experiencing could also be influenced by the decision of the European Union to prohibit imports of this product after an action determined by the G7 to somehow cut off an important source of income.

Precisely the depression that its price is experiencing, after having reached maximums of US$2,050 an ounce, when Russia invaded Ukraine, could be a reason to rise again, at a time when world inflation does not yield, interest rates Interest rates are on the rise and, furthermore, the possibility of a global recession, led by the United States, in the coming months, analysts believe.

In recent days, the price of gold managed to break the floor of US$1,700 according to information from Refinitiv, which has alerted investors to the possibilities that this poses in terms of protection or speculation with the purpose to obtain profits in a short time.

However, not everyone sees a moment of depression in the price of this metal and instead advises looking more in the long term.

But keep in mind that as the price of gold is in dollars and to the extent that the currency is higher, the prices of commodities (raw materials) tend to lose level.

If reviewed over a horizon of decades, the price of the gold metal is at its highest and it is indeed a refuge from contingencies.

For his part, the director of Economic Research at Corficolombiana, José Ignacio López, comments that the gold market has undergone some transformations and has lost some of its prominence.

He highlights that one of the factors is that the central banks are not buying gold and instead there is some decumulation, such as the action carried out by the Banco de la República “and at this juncture clearly the refuge has been the dollar, since there is liquidity with the currency, little protection has been generated by gold, almost none have been generated by the cryptocurrencies that have disappointed as a haven asset, if they ever generated that promise, and what we have seen is a retail gain in gold.”

“What we have been seeing is a loss of that correlation where many more were looking to gold as a haven.” López says that as liquidity has been withdrawn, leverage has forced many of those retailers to even sell gold positions.

For his part, Edgar Jiménez, from the Financial Laboratory of the Jorge Tadeo Lozano University, considers that similar to the inverse correlations that when the price of the commodity in dollar terms falls, the price of the currency rises, as usually happens with oil, The same thing happens with gold, although sometimes that correlation is lost and then recovered.

To be able to acquire gold in an economic or political situation, you have to buy it in dollars, which would make them rise and also the commodity, but this is not seen today.

Another aspect to consider is people and investors may not be interested in covering themselves in gold because they see that the economic situation does not have such a level of concern to go to protect themselves.

 

Given the price cuts that have been seen in the precious metal in recent months, several consider that at this time it is a good investment option, albeit conservatively, in small positions. During the recent world volatility with the price of the dollar in the case of Colombia and some emerging countries, there were additional speculative attacks against their currencies taking advantage of political factors.

On the other hand, the panorama of obtaining this precious material such as gold, through IRAIC GOLD, offers great opportunities in this market, as it does not allow risks or fluctuations as it is a real asset founded by the company, added to economic benefits reflected by the monthly dividends received by investors and the movement of IRAIC GOLD shares. Posted by Iraic.info, a news and information agency.

 

 

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