Because of a safe harbor! - That is why the gold price could not benefit from the Corona sale - News-Credit-Mortgage-Coin


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Thursday, March 12, 2020

Because of a safe harbor! - That is why the gold price could not benefit from the Corona sale

Many investors are currently very unsettled because the gold price has not yet triggered a price rally despite the crash on the stock market. Is there still time for the countermovement or is the precious metal no longer a safe haven?

 New all-time high is just a matter of time
• The sale of gold stocks is ...
• ... not unusual in times of crisis

For centuries, the yellow precious metal has been considered a "safe haven" by investors. In the current crisis, however, the gold price does not deliver the performance desired by some and therefore disappointed many gold bulls.

A negative correlation is overridden

The gold price has increased in recent weeks due to the enormous sell-off on the global stock markets, but it clearly shows that there has not been a negative correlation - expected by many investors - in this context. Accordingly, the slight increase in the price of precious metals could not compensate for the percentage losses on the stock market. At times, there was even a certain synchronism in the markets between gold and shares.

Whine at a high level!

Even if the big rally on the gold market has not yet started, the prices of the precious metal continue to swing north. The price per ounce has meanwhile regained its important mark of 1,650 US dollars. The yellow precious metal also managed to climb a new all-time high on a euro basis at a price of 1,560 euros. But gold could not overcome these price levels permanently.

Fluctuations in gold remain the rule ...

"In the past, gold has often actually developed better in times of crisis than, for example, the stock market. Many people trust that this will continue to be the case. Of course, you cannot rely on it. On the contrary, the gold price is subject to great fluctuations "said Simeon Gentscheff from Stiftung Warentest in an interview with Spiegel.
... and not the exception
It is not uncommon for the gold market to warp as a result of a global stock crash. As a result, the gold price had to cope well in the course of the financial crisis and plummeted from around USD 1,000 to temporarily below USD 750 per troy ounce. Back then, the precious metal was only able to recover at the end of the financial crisis, with the recovery rally only ending in 2011 with a new all-time high of over $ 1,900 per troy ounce.
Investors need liquidity
Compared to the 2008 financial crisis, the gold price is holding up fairly well in the current market environment, even if the coveted metal cannot make up for the price losses on the equity side, at least without the use of leveraged derivatives. The main reason for the sometimes very similar development between the stock markets and the gold price is primarily the behavior of international financial investors. Many investors have bought gold for portfolio or property insurance in the past months and years, but these investors now have to sell part of their holdings in order to obtain fresh liquidity so that they can now cheapen the average purchase prices of their equity positions. For this reason, it is not uncommon for the gold price to fall back in times of a massive sell-off in stocks.
Gold: Focus on central bankers

Gold is not a sure-fire success

For many analysts, however, a new all-time high in the US dollar-based gold market is only a matter of time. Should there be a clear rebound on the stock markets despite virus fear and shock on the oil market, it is likely that the "safe haven" will also become somewhat less secure. Accordingly, investors who are now speculating on a positive trend in the precious metals market should always plan for short-term consolidations and corrections.

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