Gold: the only asset standing up to the troubled capital market

Investors are rushing to buy more gold these days, driven by the sharp shaking of stock markets and geopolitical tensions in Europe. On Friday they invested $ 1.6 billion in SPDR Gold Shares, according to Dow Jones Market Data. This is the largest exchange traded fund that backs its shares with physical gold, that is, for each share issued there is a certain amount of gold in the fund’s storage.

Demand for gold rose due to rising tensions between Russia and Ukraine last week. Investors believe that gold will retain its value, especially in times of geopolitical turbulence, while other assets are likely to lose value.

The price of gold has had small fluctuations in 2021, reaching the highest level of 1,962.5 dollars per ounce while the record in 2020 of 2,082.1 dollars.

Another factor that has contributed to the rise in metal prices to higher levels was the expectation of investors that the Federal Reserve will take drastic measures to combat inflation. Investors consider gold as a stable store of value and therefore use it as protection against inflation.

But at the same time investors have predicted that there will be an increase in interest rates and this has made the yield on US government bonds to be higher, so they have competed with gold.