Gold prices recently reached $2,690 per Troy ounce in London trading, marking a two-week high. This surge reflects ongoing market uncertainties, with Western stock markets dipping and concerns growing over the risks associated with higher-risk debt products, which are nearing pre-financial crisis levels. Notably, this is the same price point gold reached when it set an all-time high two months ago.
Silver also saw significant movement, with its 12 noon fixing exceeding $31.90 per Troy ounce—the highest in over a month. Spot market trading briefly pushed silver prices above $32, marking a third occurrence in just a few days. This price spike puts silver at its highest level in 11 years, reaching a peak earlier this spring.
Bank of England Deputy Governor Dave Ramsden recently emphasized the continued shift of financial activity to non-bank financial institutions (NBFIs), such as pension funds, hedge funds, and money market funds. Ramsden noted that NBFIs now account for roughly half of the total assets in both the UK and global financial systems, a sharp rise since the 2007-2012 global financial crisis.
Meanwhile, demand for complex structured finance products has hit its highest point since the 2007 crisis, with Deutsche Bank’s head of US asset-backed securities describing investor demand as “relentless.” In the corporate debt markets, the extra yield demanded by buyers of investment-grade US bonds over US government debt recently fell to a 19-year low, while the spread on high-yield debt—the type of debt with lower credit ratings—hit a 17-year low.
Despite these favorable conditions for some markets, concerns remain over the impact of high interest rates and leverage on borrowers’ ability to service their debt. The International Monetary Fund (IMF) warned that private credit borrowers are facing significant cash flow pressures. In particular, US business development companies, which lend to small and medium-sized firms, have seen a surge in ‘payment in kind’ arrangements, with borrowers promising to repay debt in the future rather than providing immediate interest and dividends.
Gold continues to be seen as a ‘safe haven’ asset, with analysts like Rhona O’Connell from brokerage StoneX pointing to ongoing stresses in the banking system—particularly in smaller institutions exposed to property and commercial real estate—as a key factor supporting gold’s rise. O’Connell likened the current environment to the 2007 subprime crisis, suggesting that the emergence of unregulated financial transactions, or ‘shadow banking,’ is contributing to gold’s upward momentum.
While US financial conditions have eased to their most favorable level in over three years, according to the Chicago Fed’s national index, concerns remain about speculative bubbles in both the US equity and crypto markets. Jonathan Butler, head of business development for precious metals at Mitsubishi, warned that while geopolitical and economic uncertainties may bolster demand for precious metals in the short term, a shift toward speculative investments could drive further gains in these markets, ultimately reinforcing the appeal of gold and silver as risk hedges.
In the European markets, gold prices also saw a boost, trading above £2,100 per ounce for UK investors and reaching new two-week highs of €2,555 for Eurozone investors. European Union Commissioner Valdis Dombrovskis remarked on the region’s resilience despite ongoing political turmoil in France, asserting that there were no signs of an impending crisis.
Geopolitical tensions continue to add volatility to the markets, with ongoing military actions in the Middle East. The HTS militia, considered a terrorist organization by most Western governments, has appointed an interim prime minister in Damascus after forcing President Assad to flee Syria. Meanwhile, US, Israeli, and Turkish forces continue separate bombing campaigns in the region, as Washington’s Secretary of State Antony Blinken warned of the risk of escalating conflict.
With global instability on the rise, both precious metals and riskier financial assets are seeing fluctuating demand as investors seek to navigate uncertain economic and geopolitical landscapes.
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