Let’s see what the real safe haven origins

The stock market is now in danger of collapse. There is a widespread perception that global financial markets are collapsing.

a lot of teachers Wall Street They are predicting a real crash in global stock exchanges, and indeed the markets are losing value at an impressive rate.

Lapanda Massimo / ANSA

On Friday it was the Milan Stock Exchange jingle 5% But stock markets have been in sharp decline for weeks now.

generalized avalanches

The reasons are multiple. starts from The war in Ukraine Which shows no sign of decreasing severity and inflation.

pixabay

High inflation is a really devastating element For both families and businesses. In fact, companies are facing more and more difficulties in production due to the very high costs and many companies can close them down. But to be really scary about the sharp crash of global stock exchanges It’s the central banks themselves. In fact, central banks kept interest rates at zero during the Covid pandemic to revive world economies as well as stock exchanges. These zero rates were among the reasons for the current high inflation Thus, the central banks today are forced to raise prices sharply.

Bubble bursting in the stock market and safe assets

A rise in the interest rate could cause the dreaded bubble to burst in international stock exchanges and the collapse could be truly massive. So it is not surprising that there is a real escape from international stock exchanges And that investors are looking for safe haven assets. Ironically, however, gold is currently not considered by many as a true safe asset. This may seem surprising and contradictory But let’s try to understand why so many are advised against the yellow metal. Usually when there is inflation when stock markets threaten to crash, we resort to it.

Gold is not a real refuge

But in this case, the sharp rise in interest rates that central banks around the world are doing It makes government bonds more attractive to savers. In fact, as interest rates increase, government bonds make much more. Thus, there are a lot of savers who may prefer The yields of government bonds that are safe for the fluctuations of the yellow metal. Precisely for this reason, many assert that government bonds risk competing strongly with gold as a safe haven asset, and therefore consider gold at risk of a decline in this period.

Leave a Comment