The misfortune of the American and Swiss banks is obviously the happiness of gold. After the spectacular bankruptcies of three banks on the other side of the Atlantic, including Silicon Valley Bank (SVB) in California, and the collapse on this side of the Atlantic of the venerable Credit Suisse acquired by its compatriot UBS, investors turned into gold, fearing a general banking crisis.
On the New York precious metals futures market on Wednesday, the price of an ounce (31.1 grams) ended the session up 1.70% to 1,982.8 dollars. Monday morning in session, it even traded up to 2,009 dollars. Since its last low point, reached at the end of October 2022, its price has risen by almost 33%.
“Volatility in global markets drove prices higher as investors sought safe haven. Growing uncertainty favors gold. And whatever path central banks take at this point [en matière de hausse des taux], it might be interpreted as a mistake in monetary policy by investors, who will probably continue to want to protect themselves”says Nitesh Shah, Head of Commodity Markets at Wisdom Tree.
S&P 500 down 11.5% year on year
The S&P 500, the flagship index of the New York Stock Exchange, which brings together the 500 largest American capitalizations, shows a decline of more than 11.5% over one year. The yellow metal is also benefiting from falling yields on 10-year US treasury bills, which fell to a 6-month low of 3.3% on Monday. This Thursday, they are moving around 3.5%.
Gold also benefits from the fall in the dollar, which mechanically makes purchases more attractive for holders of other currencies. The greenback remains at a seven-week low once morest a basket of major currencies, following the new increase in key rates, by 0.25 points, decided by the Fed on Wednesday.
As for the outlook, Goldman Sachs experts anticipate a price of 2,050 dollars in the next 12 months, the same as that reached in March 2022, following the outbreak of the Russian war in Ukraine in February. The American bank highlights the risk represented by the weakening of the banking sector.
Rising interest rates, an influencing factor
Indeed, in front of the elected representatives of Congress, the Secretary of the Treasury, Janet Yellen, threw a chill on Wednesday by clarifying her position.
“I have not considered or discussed any comprehensive insurance or warranty protection for all deposits”she said, wanting to rule out moral hazard, which characterizes excessive risk-taking by banking establishments convinced that they will always be saved by the public authorities.
The rise in rates will also be a factor influencing the evolution of the precious metal, a higher bond yield is unfavorable to the yellow metal. “Recent gold price action suggests that the pace and depth of the rate cycle may be slowing, and the Fed’s decision to hike rates by 0.25 points sends the same signal.”said Thursday Joe Cavatoni, the World Gold Council’s (WGC) strategist for North America, in an interview with Market Watch.
“We are monitoring the possibility and timing of an economic recession, which in this case will cause many investors to increase their allocation of gold in their portfolios”he says.
However, it remains to be seen when this will happen. The yellow metal also benefits from a floor price thanks to central bank purchases, the volume of which reached a historic record last year, with 1,135.7 tonnes once morest 450.1 tonnes in 2021, an annual increase of 152%, the largest annual volume since 1950, according to WGC data. And despite the Western embargo, the Russian Central Bank, quoted by the Bloomberg agency, announced on Wednesday that it had increased its gold reserves “of 1,000,000 ounces last year, some 31 tonnes, bringing its total volume to 2,330 tonnes.
In 2023, this volume should not be as high, estimates the WGC, in particular due to the effects of the rise in rates decided by the monetary institutions which can arbitrate their foreign exchange reserves in favor of currencies or bonds.
Central bank purchases up 16% in January
Waiting for, “The central bank of Singapore announced the purchase in January of more than 1.4 million ounces of gold, the equivalent of 44.62 tons of yellow metal”, notes Laurent Schwartz, CEO of the Comptoir National de l’Or. This represents a 30% increase in the reserves of the Central Bank of Singapore, which now has 198 tonnes in its coffers. “Is the city-country very active in terms of international trade also seeking to de-dollarize and diversify its reserves? »asks the expert.
In this case, there is a margin. The central bank has nearly $291 billion in reserves, of which regarding $4.5 billion is now invested in yellow metal, or just 1.5%. Singapore is not the only buyer. In January, Turkey, China and Kazakhstan were also buyers.
In the first month of the year, 31 additional tonnes were purchased net by central banks according to the WGC count, i.e. 16% more than in December 2022. A good way to start the year for the yellow metal .