Why has gold lost its luster as a safe haven amid crises?

A store of value and a safe haven against the fluctuations of other assets such as stocks, currencies and oil. 

Investors hedge it and protect their money from the factors of inflation and economic stagnation

It's gold

Which has achieved increases of more than 10% annually on average in about half a century, specifically since 1971

But unusually, it did not provide a safe haven for investors against economic crises in 2022

Although there is a combination of global inflation, instability and global fears due to the Russo-Ukrainian war and the possibility of a global economic recession,

It pushes investors to buy gold and supports its high price as a store of value during economic crises.

At the end of 2021, the price of gold was $1,833.40 per ounce, which weighs 31.1 grams.

However, it witnessed a rise in March 2022 above the level of 2000 dollars due to the Russian-Ukrainian crisis and global inflation.

Before falling to the level of $1800 and $1700 in July 2022, then to $1633.40 in September 2022,

For gold to fall more than 20% from its great height in March 2022,

It is at its lowest level in two years

The Fitch Ratings Agency also expects a further decline of the yellow metal to the price of $ 1,600 by 2023, and fears are increasing that gold will return to the levels of $ 1,500 that prevailed in 2019

So why has gold lost its luster as a safe haven amid crises?

The yellow metal is usually affected inversely with the movements of the US dollar, which often rises with the increase in interest on it,

Which is what happened in 2022.

Investors abandoned gold for more profitable investments such as bank deposits and bonds after raising the US interest rate to 3 and 3.25%,

The dollar index rose against six major currencies by more than 17% since the beginning of the year until the end of September 2022,

What reduced the attractiveness of gold

Therefore, with every next raise of the US interest rate to restore inflation near 2%, which is expected to reach 4.5%, the dollar price will rise more and that will be worse for gold.

But only one case in which gold may rise and regain its luster,

If the world hits an economic recession as a result of continuing to raise interest rates, as the World Bank expects a recession in the global economy in 2023,

Here, the yellow metal may quickly cross the $2100 level as a safe haven against recession due to the Fed’s shift to reduce interest rates, as gold rose from the $1740 level in March 2020 to the $2060 level in August 2020

Some believe that even if the Fed did not cut interest rates, and chose to continue raising US interest rates, but at a slower pace, this would provide support for gold.