For Commodities, it appears that All That Glitters Is Gold. Despite recent financial system instability and fears about the global economy's health, gold has stayed stable.
What are the reasons for the precious metal's continued radiance?
In March, investors flocked into gold. The price is currently hovering slightly about $2,000 per ounce, up 8.4 percent this year.
The recent increase follows the failure of Silicon Valley Bank and Signature Bank in the United States, as well as the takeover of Swiss Bank Credit.
A late March sell-off in Germany's Deutsche Bank by rival UBS has also raised concerns about the banking system, but gold has shone through the uncertainty.
Investors prize gold for its consistency in tumultuous times and frequently consider the precious metal as a substitute for the established financial system.
Here's an illustration of its most recent appeal: in the week following the svb crash, net inflows into gold exchange-traded funds reached almost 14 tonnes, or more than $1 billion, although in March, a few months prior to the collapse, investors had been withdrawing funds' assets.
Expectations that central banks will slow the rate of interest rate increases in order to relieve strain on the financial system over the past year helped gold.
The Federal Reserve has boosted interest rates in an attempt to control inflation. These increases have made the objective less appealing to investors because, unlike other investments, gold does not pay interest.
In March, Fed Chair Jerome Powell announced another rate hike, but he hinted that it might be the last one for the time being. We no longer think that continuous rate hikes will be appropriate to contain inflation, resulting in a rise in gold prices. Gold is also benefiting from a decrease in the dollar.
A weaker dollar raises the price of commodities backed by the US currency, one of which is gold. In comparison, gold had a less successful year in 2022.
Following Russia's invasion of Ukraine, it briefly traded at around $2,000 per ounce, but as the FED began raising interest rates to combat inflation, the dollar soared to a 20-year high, causing gold prices to rise slightly. However, the US dollar has since retreated from its 2022 peak, allowing gold prices to rebound towards the end of March.
Gold prices surged to a record high before falling somewhat as a result of rescue measures for the faltering.
Banks assisted in allaying concerns about contagion, but analysts anticipate gold to hold up well. According to international gold council analysts, gold has been performing well, staying above $1500 an ounce for the past three years. According to Fitch Solutions, rising global financial instability will likely continue to push up gold prices.