Analysing whether gold retains its worth as a safe-haven asset is crucial given how unstable and unpredictable the financial markets remain. Investors are seeking a safe-haven assets to safeguard their wealth because of the present market turmoil. But is this really the case? Gold has historically been considered a trustworthy asset in difficult times.

Nonetheless, each crisis episode is unique and creates a different set of market turbulence. As a result, gold behaves differently each time it is used as a hedge or safe-haven.

Through the public health emergency, gold fluoresces.

During the time the epidemic of COVID-19 started to spread. Several lockdowns weighed heavily on the world economy, stopping supply networks. Gold hit an all-time high price of $2,030.60 per ounce in August 2020 thanks to investors’ rekindled interest in “safer” investments.

The fall of the Swiss giant Credit Swiss followed by Silicon Valley Bank.

Since the tech-focused Silicon Valley Bank’s abrupt failure and the Swiss-giant Credit Swiss purchase from UBS, the global banking sector has been shaken, contributing to the recent rise of precious metals above the $2,000 mark. The price of Spot Gold experienced its greatest weekly increase (+6.52%) on 13 March.

Dollar’s Connection with Gold

The age-old claim that gold and the dollar have an inverse relationship is still valid today. A recession could result from more interest rates, and this could cause investors to turn to gold to cushion a slide in riskier asset classes. With the US currency strengthening because of the Fed raising interest rates, the price of gold declined.

Takeaway

According to historical data, gold is expected to rise more quickly than other commodities. The risks associated with the global macroeconomic policy boost are made easier to manage with gold. Gold is still a wise investment despite its contradicting price swings, but because of its safe-haven characteristics, it requires greater care.