September 22, 2023

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The Gold bull running faster in the wake of the latest banking crisis

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Latest news on ETFs | Financial Times

Once again, the price of gold shot up because of financial instability – in particular the recent banking crises In the U.S. The high volatility and heightened volatility in the precious metals market led to the U.S treasury flashing signs like they did during the Global Financial crisis.

Looking at the March figures, gold rose by $142.35 an ounce closing at $1,969.28 as the US economy reeled from the collapse of the Silicon Valley Bank as well as the Credit Suisse buyout which was a surprise to many. Gold ad its highest close In March, the highest it has reached as of July 2020 rounding off its first quarter gains of 7.9% gold. Gold responded well in this environment, as the market has recognised two possible outcomes: higher inflation when interest rates brought down to stabilize the economy or additional stress to the financial system if rates stay high to fight inflation. In response central banks were set out to buy bullion Brisbane as fast as they can.  For the past couple of years, central banks have been the dominant buyers of gold, this is a fact that a lot of gold buyers and investors need to understand and learn. If banks are buying so much of it, what does that mean for the ordinary man on the streets?

The Banking Crisis and inflation

Interest rates have been increased in the past year to 4.50% and banks had to shrink balance sheets as a response to the rising inflation. Despite these efforts, most economies aren’t performing as expected. It might be premature to call the gold market bullish, not with unemployment figures as high as they have been and inflation still raging. So, which should we tackle first, the inflation rate or the banking crisis?

Central banks might be in a bind because of the economic stresses they now face. However, easing their stress might send inflation on a tail spin. If we consider the short term, the banking crisis should trumps inflation. This is because measures that central banks would take like tightening policy might end up putting economies at a risk of recession.

Gold Bullish more so now than ever

Gold has been responding very well to the problems experienced in the economy. It seems to be approaching the upper end of its trading range. The physical buying of gold bullion by central banks and governments is increasing as is the buying of gold by individuals. The rate at which gold is being bought is at a decade’s high.

Whilst everyone had their eyes on the Russia/ Ukraine situation, they missed a lot more. The banking crisis seems to have come out of nowhere leaving policymakers flatfooted and uncertain about what governments should do to help. This uncertainty plays well into the gold market because the precious metal industry performs well in times of uncertainty.

All in all, this is not the time to sit on the fence as far as investing your money. Buy bullion Brisbane as a hedge against economic upheavals.

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