Gold price benefits from uncertainties in the economy

Gold already rose 6.7 per cent in value last week. Experts attribute the recent surge in gold prices to ongoing concerns in financial markets. Swiss investment bank Credit Suisse was rescued on Sunday evening, thanks to an additional €50 billion package of government support. Banks in the United States have also been rescued with emergency credit and guarantee deposits from consumers.

Gold

Investors buy gold to protect themselves against systemic risks and because gold has no counterparty risk. Despite the recent interest rate hike, precious metals prices rose sharply. Normally, an interest rate hike causes prices to fall, but in this case investors anticipate that the higher interest rates will be short-lived. In turbulent economic times like these, with the situation surrounding Credit Suisse, people still seem to fall back on gold.
The gold price climbed to over $2000 per troy ounce (31.103 grams) on Monday morning. The last time the gold price was slightly above $2000 per troy ounce was on 10 March last year. At the time of writing, the gold price stands at around $1980 per troy ounce.
To quell the turmoil in the financial markets, Swiss bank Credit Suisse was acquired by its larger rival UBS on Sunday. Although the bank appears to have been saved from collapse, Credit Suisse shareholders are suffering heavy losses due to the bailout. Credit Suisse's bondholders are also suffering heavy losses, as the price of the takeover is many times less than Credit Suisse's current market value.

Credit Suisse share price Wednesday, March 22, 2023

Central banks

Meanwhile, central banks continue to take measures to avert a crisis. The European Central Bank and the US Central Bank the Fed have said they will provide banks with enough money should they run into trouble if customers withdraw their money. By doing so, the central banks hope to prevent another run by savers on the banks.
Despite efforts by regulators to restore calm in financial markets, uncertainty surrounding European banks flared up on Friday. Share prices of several German banks slumped this week, while insurance premiums against defaults skyrocketed. Deutsche Bank, like Credit Suisse, is in the midst of a major restructuring. In addition, Germany's biggest bank is said to be seriously failing in their money-laundering policies. A scenario we know from Dutch big banks ING, Rabo and ABN.
Many investors are looking for alternatives to bank stocks. As often happens in times of crisis, people often reach for gold and other precious metals, as this is seen as a risk-free investment. Investors currently see gold as a safe haven as share prices are under pressure.

Credit Suisse bars

With the takeover of the Swiss bank, it is uncertain whether Credit Suisse bars will remain in production. Credit Suisse has an LBMA accreditation and produced bars of gold, silver, platinum and palladium. It is still unknown whether the Credit Suisse brand name will remain, it will remain an independent brand until the merger is completed. After this, UBS will decide whether to pull the plug on Credit Suisse's separate identity.
The Silver Mountain only sells gold and silver bars from LBMA-certified producers. These bars are tradable globally, without further analysis. We also offer a unique buy-back guarantee on all products you buy from us.
Disclaimer: The Silver Mountain does not provide investment advice and this article should not be considered as such. Past results offer no guarantees for the future.