Is Gold the Ultimate Safe Haven?

For centuries, gold has been considered a safe haven by major financial institutions worldwide. Its position has fluctuated over time, but since the financial crisis of 2008, gold has remained a crucial investment for banking actors and states, providing them with a certain stability during economic turmoil.

In times of high volatility, gold stands out for its ability to preserve value. Gold is perceived as an intrinsic value that can also diversify an investment portfolio, reducing overall risk due to its potentially low correlation with other asset classes, such as stocks and bonds, that can be heavily influenced by interest rates, inflation or the economic performance of companies.

In 2023, central banks accounted for nearly a quarter of the global demand for gold, a significant figure illustrating their continued confidence in this asset. This massive support from central banks has been a major factor in the rise of gold prices in recent years. Central banks added 1,037 tons of gold to their reserves, the second-largest annual purchase in history, just after the record of 1,082 tons in 2022. This increase in gold reserves by central banks is driven by an increasingly complex and uncertain geopolitical and financial environment. International tensions, trade wars, and economic challenges make managing gold reserves more relevant than ever. Gold offers a form of security that few other assets can provide, especially during periods of instability.

China, has implemented a policy to reduce its holdings of US Treasury bonds while increasing its gold reserves, as a strategy to reduce exposure to the US economy and diversify its reserves. By purchasing large quantities of gold, China has helped drive up the price of gold per ounce. However, this policy has come to a halt for the second consecutive month recently, causing concern among some investors. This shift in strategy by the People's Bank of China (PBOC) highlights the need for investors to protect themselves against potential downward fluctuations in the gold market.

Currently, the price of gold per ounce is being negotiated at all-time high, close to $2,500 per ounce. Forecasts from many banks, including Citi, Bank of America, and JP Morgan, are optimistic, with estimates around $2,700 to $2,800 per ounce in the near future. This anticipated increase reflects continued confidence in gold as a safe haven, particularly in times of increasing recession expectations and interest rate cuts.

A structured product with 100% capital protected and Twin win payoff can be a tactical play to capture these moves on both ways (up and down). It can be either on XAU/USD LBMA Gold fixing directly (GOLDLNPM Index) or SPDR Gold Shares ETF (GLD UP), both with similar prices.

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For informational purposes only. Not investment advice.