Can gold shine through the market turbulence

Published Date: Agosto 7, 2024

Author: HANetf

Gold as a “safe-haven”

On Monday, the S&P 500 dropped by around 3%, registering its largest daily loss since September 2022. The selloff seems to have been prompted by Japanese stocks seeing their worst crash since 1987, alongside fears of an impending recession in the U.S.

Equities were not uniquely affected, with cryptocurrencies losing around $370 billion in 24 hours.

In such environments, investors have often turned to gold. Considered by many to be a “safe-haven” asset, gold has historically proved resilient to broader market turmoil.

In this case, gold fell by -1.6%, raising questions as to why the apparent safe-haven dropped during the broader selloff.

Let’s put this in context. In July, gold reached a new all-time high of $2,461 per ounce, having begun the year at $2,043. As at time of writing (07/08), the price of gold is $2,395 per ounce, meaning the precious metal is still up 17.23% year-to-date (YTD), and only $66 off the all-time high.

Source: Reuters; LSEG as of 07.08.2024. Past performance is not indicative of future performance. Included for illustrative purposes only.

In times of market turmoil, investors have historically sold their winning gold positions to cover wider losses, which could explain Monday’s price drop. As Adrian Ash, director of research at BullionVault, points out, it is common for gold to drop in stock market crashes “but it falls less and from higher ground before finding its floor sooner.”

Perhaps then, gold has so far justified its “safe-haven” status. The question is, what next?

According to Han Tan, chief market analyst at Exinity group, the outlook for gold may well be positive:

“Elevated geopolitical tensions and recent hopes for even greater Fed rate cuts should create supportive conditions for bullion. Ultimately, gold should be able to post a new record high once nerves settle.”

In times of speculation around impending recessions and geopolitical instability, gold has often been favoured. As such, speculation of bigger interest rate cuts by the Fed and escalation of tensions in the Middle East may bode well for the precious metal.

Recently, we discussed the ways in which investors can gain exposure to gold, and the importance of accessing it responsibly. Read our article where we break down the recent discussions around the validity of recycled gold, and the importance of traceability.

In 2020, we partnered with The Royal Mint – the official maker of British coins since its origins in c.886 AD – to create The Royal Mint Responsibly Sourced Physical Gold ETC (ticker: RMAU). All of the gold within the ETC is custodied by The Royal Mint, at their highly secure vault in Llantrisant, Wales.

Crucially, all of the gold is London Bullion Market Association (LBMA) post-2019 responsibly sourced good delivery bars – ensuring that the gold is fully traceable, and ethically sourced.

But beyond this, over half of the gold held by the ETC is 100% recycled gold, thanks to The Royal Mint’s partnership with Quintet Private Bank.

KEY RISKS

Investors’ capital is at risk and investors may not get back the amount originally invested and should obtain independent advice before making a decision.

Any decision to invest should be based on the information contained in the relevant prospectus.

ETC securities are structured as debt securities and not as shares (equity).

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Can gold shine through the market turbulence

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