Gold as a safe haven
It is a well known fact that gold becomes a safe haven during uncertain times, and these are uncertain times. So it’s no surprise then that gold has increased in value during this period. At its highest in recent weeks, gold has reached: $1766 per troy ounce.
Governments around the world struggle to re-open their closed economies as the coronavirus pandemic wreaked untold damage as it ravaged through nations forcing world-wide lockdowns. Gold, once again became a safe haven.
Despite the stock market recovery since 23rd March 2020, where equities have surprisingly and quickly moved back in favour (that’s another story), gold too has become a sought after commodity.
Gold has been used as a method of wealth exchange for thousands of years. Central banks hold gold reserves because of its liquidity. This helps reduce balance-sheet risk.
Gold is believed to allow central banks to protect capital and at the same time allow diversified portfolios. Gold can also be moved relatively easily if required.
So, where is all this gold?
The U.S. Federal Reserve is reportedly the world’s largest holder of gold, with 8,133 metric tonnes. England has the second largest gold reserves at 4960 metric tonnes that’s 400,000 gold bars. Germany is the third largest gold holder with 3,362 metric tonnes.
The International Monetary Fund has the fourth largest gold reserve at 2,814 metric tonnes. Italy and France hold around 2,451 metric tonnes and 2,436 metric tonnes respectively. A single gold bar weighs 12.4kg.
The Bank of England has one of the world’s largest gold vaults. The Bank of England is the second-largest custodian of gold in the world, after the New York Federal Reserve.
Market moving news to watch today, Friday 5th June 2020
Latest U.S job report data due today (non-farm payroll reading) at: 13:30 BST
U.S. lost jobs
The non-farm payroll data reading on Friday will be the last bi market moving event of the week. It’s quite likely markets will spin the data we have to remember that the data overall is bad despite the promises of the U.S. re-opening. Unemployment in the U.S. has reached unprecedented levels not witnessed since the Great Depression of the 1930’s. This will not ‘go away’ quickly.
The bad news likely to be seen today should not be ‘spun’ away as a simple a ‘bad news is good news’ story. It’s far from it. The fact that the overall unemployment in the U.S. is rising is a worry.
It could be that that businesses are not re-hiring at a fast pace, or worse, workers laid off simply don’t want to go back because they get more being unemployed thanks to the generous benefits put in place by the U.S. government and Federal Reserve.
It has been reported that about 40% of US workers are better off not working. This is worrying. If the U.S. economy re-opening attempt goes badly, then the U.S markets will suffer and so will markets around the world. And that’s the people will continue to suffer too.