Gold broke its all-time high on Monday, reaching $ 1944.71 (1660 euros) an ounce in Asian trade. Its rise was fueled by its status as a safe haven in the midst of a pandemic, the result of a long history and unique characteristics.
It thus largely erased its previous record in session of some 1,921 dollars per ounce, signed in September 2011. The price of the yellow metal has appreciated by more than 27% since the beginning of this year.
As the coronavirus epidemic worsens in many countries, investors are praising this eternal safe haven in times of crisis.
The broad monetary easing measures decided by the US Federal Reserve (Fed) have pushed the dollar down in recent months, further enhancing the attractiveness of the precious metal. As its market is denominated in dollars, a decline in the US dollar makes it less expensive for buyers using other currencies.
Analysts predict that gold should soon exceed $ 2,000 an ounce, while the Fed may deliver new exceptional measures on Wednesday after its monetary policy meeting.
The precious metal par excellence
Rare, relatively easy to extract, easily malleable (it becomes liquid at 1,064 degrees Celsius) and stainless, gold has many qualities, in addition to its beauty, which make it very practical and have made it the precious metal by Excellency.
It will retain a predominance in the international monetary system until 1971 and the decision of American President Richard Nixon to suspend the convertibility of the dollar into gold, shattering the Bretton Woods system inherited from the Second World War. In the meantime, silver had already lost its luster, especially with the discovery of numerous deposits on the American continent.
If, today, gold is no longer commonly used as a medium of exchange, it remains a privileged value for anyone who wants to protect themselves from hazards.
Because of its rarity, and therefore its price, “a lot of value can be kept in a small space”, explains Carlo Alberto De Casa, analyst for ActivTrades and author of a book on precious metal.
The supply of gold being constant over time, compared to that of other raw materials such as oil, for example, it enjoys an image of stability.
Between 2018 and 2019, mining production changed very little, dropping by around 1%, and only the increase in recycling helped increase the total supply by around 3%.
And the precious metal, “unlike the dollar and other currencies, cannot be printed” at will, adds the expert, while the main central banks of the world have poured unprecedented amounts of liquidity to face the economic crisis.
On the other hand, gold does not offer returns, as it is with bonds with interest, or stocks with dividends.
What could be a default makes it an asset in a period of crisis: its value and its return (which is therefore zero) do not depend on the health of the real economy, it is resistant to the ups and downs of activity and becomes a safe haven to which investors flock.
This is also the case for other precious metals, such as silver or palladium, but since these are largely used for industrial purposes, their demand tends to decline during a global recession.