Gold price depressed
After the stock markets crashed on Monday, the markets were on a slight recovery on Tuesday morning. In the afternoon, however, the DAX slid back into the red. Gold and silver remained under pressure. At 4:30 p.m., the gold price on the spot market was $ 1,658 an ounce (-1.3 percent). This corresponded to 1,457 euros (-0.65 percent). The silver ounce cost $ 16.87 (-0.7 percent) and 14.83 euros (+0.05 percent).
One reason for the run of many financial institutions on cash is that precious metals did not continue to shoot up despite the tense crisis (corona virus effects, oil price crash). There may also be targeted market interventions. The physical demand for gold and silver is still very high – also in the German precious metals trade. But what has to happen for the price of gold to shoot through the roof again? Or are the precious metals now being sold off even more?
Credit crunch ahead?
The situation on the financial markets remains tense. This is also shown by the credit spreads in the banking sector. The premiums for credit default insurance have increased significantly in the past few days (see table below). Some now fear a credit crunch, in which banks no longer borrow money from one another due to distrust. In this case, the run to cash could escalate significantly and further (paper) gold with correspondingly negative price effects could be thrown onto the market. We already know this escalation from the last financial crisis in 2008. The gold price initially fell over a period of three months and then continued to rise as the US Federal Reserve announced new rounds of liquidity (“QE 1-3”). It could be similar this time. Will the Fed buy corporate bonds or stocks soon?