Gold soars ahead of expected macroeconomic crash

Gold was considered traditionally as safe haven asset due to its low volatility. This is a type of investment that is especially useful in times of crisis because, unlike the vast majority of assets, the value of gold usually remains the same or experiences very little fluctuation.

However, something is changing in the traditional behavior of the gold price. This is stated in an article published in Five days manager of GPM SV and director of the Confidential Stock Market Club Hugo Ferrer.

The expert indicated that In 2024, the price of gold increased by more than 15%That’s nearly three times the return of the S&P 500 index, which includes the 500 major companies listed in the United States.

However, what strikes Ferrer is not the number, but the moment at which this rebound occurs, indicating that Gold’s link to real interest rates is broken (the difference between long-term interest rates quoted by the market and inflation, which the market also estimates for that long-term period).

At the same time, the specialist emphasizes that This huge rise in gold prices occurred without a “macroeconomic disaster.” this can actually send the gold metal into the stratosphere: the onset of a recession in the United States.”

Traditional relationship between gold and real interest rate

Until now, the price of gold has behaved “in line with the evolution of real interest rates.”. If the US government rewarded its debt securities well above the expected rate of inflation, investors were happy and did not bid up the price of the metal gold. But if, on the other hand, there were times when interest payments did not cover the expected rate of inflation, gold acted as an escape valve through which investors could escape from these stages of financial repression,” explains the manager.

However, this link between real interest rates and gold, according to Hugo Ferrer, “could end in 2022.”for it is this year that the 51-year link between real interest rates in the United States and the price of gold is broken.”

Possible origin: War in Ukraine

The expert believes that this is a breakup between gold and real interest rates The origins of this could be at the beginning of the Ukrainian war.. The West responded to the Russian military invasion by freezing the financial assets that Russia had in these Western countries.

“From this moment Non-aligned countries such as China, Russia, Iran, North Korea and others are starting massive purchases of gold. given the deep mistrust that their financial assets in other countries would not be safe,” recalls the director of the Confidential Stock Market Club.