After Strong Sell-Off: Will Gold Become a Safe Haven in Times of War?

by | 9. Oct 2023 - 12:53 | Spotlight on Precious Metals

The strong bond yields and the associated strong U.S. dollar pushed the gold, silver, and platinum prices through prominent chart marks last week, thus probably triggering further stop-loss orders in the market. A rapid, short-term sell-off was the consequence. Gold fell to 1820 US$/oz and thus lost more than 100 $/oz within one week. One must look for comparable scenarios like what happened to silver and platinum.

At the weekend, shocking news from the Middle East: Israel imposed a state of war due to a massive attack by Hamas. Hundreds of dead, mainly civilians, are the result. The West is also deeply involved in this conflict through its alliances; the U.S., for example, moved one of its aircraft carriers to the eastern Mediterranean. For the first time in a long time, the Ukraine war is no longer the top news story of the day but rather the question of whether there will be an escalation of the conflict that draws other countries into it.

Precious metals reacted immediately to the news from the Middle East and gained significantly in early trading. This is understandable since precious metals are known as a stable crisis currency. Especially since another ally of the Western union of states is now at war and not three hours away from us by plane. We expect prices to continue significantly recovering in this environment since gold and silver should benefit from this. For stock markets, however, such an environment is rather harmful.

In addition, there are reports from the central bank sector: “But it is easing and even declining steadily,” ECB President Lagarde is quoted on Reuters regarding inflation. In principle, this should also be positive news for the price development of gold and silver because it seems as if the interest rate high has been reached.

In the minor platinum group metals, the iridium market has calmed down again for the time being. Still, nevertheless, it seems that further price steps are imminent, especially with a view to 2024. The big concern in the market continues to be securing availability in the long term.

“PGM – Spotlight on Precious Metals” is a commodity column focused on gold and precious metals but mainly dedicated to the widely discussed yet rarely analyzed platinum group metals (PGM). Focused on the industrial applications of the metals as well as their potential as tangible assets, the abbreviation PGM has a twofold significance: With Philipp Götzl-Mamba, we could win an experienced precious metal trader operating at the cutting edge of the industry, sharing his knowledge with us.

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