Gold is no longer the certain safe haven it once was, researchers at the University of Cape Town’s (UCT’s) Department of Finance and Tax have discovered. The yellow metal lost this status as a result of the Covid-19 pandemic, they found.
The research team studied how both “hard” commodities, namely gold, silver and platinum, and “soft” commodities – corn, soybeans, wheat and livestock – moved relative to major US industry sectors, such as energy, healthcare, real estate and tech, when the markets were experiencing turmoil. They gave extra focus to the Covid crisis.
They point out that, when financial markets are in turmoil, investors try to protect their money by investing it across assets that won’t all lose value at the same time. Traditionally, this has been a role of gold – the asset that keeps its value (or even increases in value) as stocks crash. This, however, no longer seems to be reliably the case.
“Using two sophisticated statistical techniques to track how commodities and sectors moved together over time, the researchers found that gold’s protective power against sectors like financials and industrials largely evaporated after the pandemic,” reported UCT. “Silver and platinum told a similar story; both started moving more closely in step with the industries they were meant to protect against, the opposite of what one would want from a safe haven.”
