Gold is back in focus as economic uncertainty, stubborn inflation, and recession fears shake the markets. Will it solidify its status as a safe haven, or will investors turn to alternative assets?
With the recent reset in the stock market, many investors are wondering whether gold could be a value asset to hold in your portfolio.
Historically, the precious metal has always played a key role as a safe haven in times of economic and financial uncertainty.
However, to answer this question, it is essential to analyze how gold has performed in the past and what factors are currently driving demand.
Gold Demand Trend: A Reversal of Trend
Demand from retail investors is increasing, especially among North American investors.
This trend signals a rush to safe haven assets, fueled by widespread panic in the markets.
Several macroeconomic factors are driving this growing demand, but two stand out:
- Debt to refinance in 2025: The United States will need to refinance 9.2 trillion dollars, a massive issuance that could impact the bond and currency markets.
- Pressures on interest rates: With inflation at 3% YoY, the Federal Reserve has limited room to cut rates without risking renewed inflationary pressures.
Gold has historically maintained a positive correlation with the US deficit, and in an environment of high interest rates, the rising cost of debt could make new issuances more expensive—further increasing gold’s appeal.
If country risk were to rise, the value of Treasuries and the dollar—traditionally considered primary stores of value globally and for central banks—could weaken, further driving demand for gold.
So gold is set to rise? Not necessarily
Donald Trump’s recent economic policies could push the US into a so-called "Trump Recession".
This scenario could act as a catalyst for additional rate cuts by the Fed. However, this could lead to the opposite effect of what has just been discussed: a resurgence in demand for Treasuries and the dollar, despite the usual inverse correlation between recessions and government bonds.
While recessions generally favor gold, a surge in demand for Treasuries could cause investors to shift capital away from gold and into bonds, creating a paradoxical effect.
This occurs because there is a well-established inverse relationship between the price of gold and that of Treasuries—when bond yields decline, gold tends to rise, and vice versa.
So what to expect?
Gold remains a valuable asset in uncertain times, particularly given the challenges facing the global economy and the growing burden of US government debt.
However, its future trajectory will depend heavily on the Federal Reserve’s monetary policy and the shifting balance of capital flows between safe-haven assets such as Treasuries and the dollar.
For investors, gold continues to serve as an effective hedge against volatility, but staying attuned to evolving macroeconomic and monetary trends will be crucial.
Original article published on Money.it Italy 2025-03-06 15:24:41. Original title: L’oro è ancora un bene rifugio oggi?
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