Gold went from being worth US$1,867.20 an ounce on March 10 to US$1,998.60. It even exceeded US$2,000 an ounce on March 23 and 24, a price that had not been registered since August 2020.
This is because, as Diego Camacho, international economist at Credicorp Capital, comments, gold is considered one of the risk-free assets, that is, its value is expected to remain regardless of fluctuations in the value of money and levels of risk. world inflation that may be affected by crises, such as the one that the US financial system has been going through in recent weeks.
César Romero, Head of Research at Renta4 SAB, explained that the price of gold began to rise, indeed, because the market perceived a greater probability of recession in United Statess. “Expansion waves due to a structural fall generate appreciation of gold, since other risk-free assets such as the dollar or bonds tend to depreciate,” Explain.
Camacho considered that it is very likely that we are seeing the end of one cycle and the beginning of another, in which liquidity will grow again and, in this sense, the value of the dollar would decrease, giving a new boost to the value of gold. We believe that gold will continue to gain relevance in portfolios since the start of the rate reduction cycle will arrive where there will be room for new valuations.
The US Federal Reserve reported at a press conference on March 22 that the interest rate it was increased by 0.25 basis points in the midst of a crisis in the financial system that had the hope that the rate would be maintained. Although this was not fulfilled, a 0.25% increase compared to previous increases of 0.5% and 0.75% were a relief.
A clear example of this was that gold, despite the rise in interest rates by the Fed, maintained its trend and price above US$1,900.
For Romero, the market’s reaction was due to the fact that the Fed’s interest rate hike was lower than what was initially expected in February, when it was believed to be 0.50%.
Camacho added that, in addition to the interest rate and the fall of banks, banks in Asia have also been seen accumulating large gold reserves, contributing to the rise in the price of gold.
The question is: will the trend continue or will we see the dollar drop in price again and the market calm down and put aside its nervousness?
Romero considered that the upward trend should continue in the short term. This is due to the possibility of falling rates in the same period of time. In the medium term, it will depend on the extent to which the Fed cuts rates again.
Romero and Camacho agreed that the next gold resistance (as a price level that stops, stops, or has a break on the same scale is called) It would be observed above US$2,000, although there would be no further takeoff.
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