Home Paper gold: A looming crisis

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The monthly bulletin of LEAP (European Laboratory of Political Anticipation) - 15 May 2020

Paper gold: A looming crisis

Are the precious metal markets rushing to get ready for the biggest bull run in history? Recent actions by the London Bullion Market Association, the Chicago Mercantile Exchange and many international bullion banks could be pointing towards a perfect storm in the precious metals sphere – one that could see a final collapse of the price discovery through derivative contracts, and true physical prices soaring beyond the $3000 dollars an ounce foreseen by the Bank of America.[1]

Gold is back in demand as global markets falter

Spot gold prices outside America have been setting all-time highs since last autumn and the collapsing value of many currencies – particularly those dependent on oil to support their national budgets – will likely see the yellow metal resuming its historic role as a currency hedge. Here in Europe, stock markets have been in the doldrums for a number of years, despite the extension of the zero interest rate policy. Since December, spot prices have risen 17% (figure 1) despite all the market turmoil caused by the COVID-19 crisis. What’s more, they seem to be resilient in the face of all threats, biological and financial, even jumping back quickly after attempts by the big banks to dampen down the bull market.

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Contents

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