“Gold broke through an important threshold”: several reasons for the clear rise of this “barbaric relic”


Before explaining this increase, the expert immediately clarifies that the gold market is “very technical” to “part psychology is very important there”. Intrinsic value calculations, often based on income generation, are irrelevant to gold because it has no intrinsic value.

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It is also very dangerous to take for granted certain correlations observed in the past, such as the good performance of gold during periods of negative real interest rates. The recent rise in gold despite the rise in the price of money is proof of this.

“Barbarian Relic”

What remains to be understood now is the clear rise in the values ​​of the yellow metal and other safe havens such as the Swiss franc in recent months.

“I heard that many central banks, especially in Asia, have stocked up on gold. This explains the price stability. They wanted to diversify against the dollar,” underlines Jérôme van der Bruggen. This “desire for diversification” it has its origin in the decision of the Americans in February 2022 – at the beginning of the war in Ukraine – to limit access to the dollar, especially to the Russians.

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“The confidence that gold inspires is purely psychological”

And if central banks have returned to gold, which is not a very liquid asset, it is because it represents the safe haven par excellence. “Gold has been called a barbarian relic because it is a good guardian of value. It takes the same amount of gold today to buy the same amount of wheat as it did 2,000 years ago. The confidence that gold inspires is purely psychological.” recalls Jérôme van der Bruggen.

When adding “that there is never a single reason in the markets to explain the rise of gold”. The yellow metal in his eyes also rises due to the context of concerns about “the sustainability of budget deficits and the difficulty our leaders have in reducing them.” He takes the example of France, which is trying to find measures that will make it possible to raise the 10 to 20 billion euros needed to reduce the deficit below the five percent threshold.

Security tool

Some experts also attribute gold’s rise to jitters in stock markets and fears of a crash. Historically, gold tends to rise during periods of stock market crash and liquidity crisis, as we saw during the last stock market crisis in 2008. Degroof Petercam also puts a small piece of gold (around 1%) in all portfolios for decorrelation reasons. It is a kind of hedging tool to protect against falling stock prices. “We create a mixture of decorative values” which may include the Swiss franc (which is also currently benefiting from a somewhat “stricter”), explains the IOC. On the other hand, there is no Bitcoin because “we do not have a sufficient view of its decorative properties” even though cryptocurrency has the same property as gold, it has “defined stocks’.

However, Jérôme van der Bruggen does not believe in a market correction. On the contrary, he says “quite confident” compared to current prices, which explains the bank’s choice to overweight stocks in its portfolios.

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The first argument: “OWe are beginning to see some benefits of technological innovation and digitization. The market extrapolates these productivity gains to other sectors, such as the medical sector. Corporate margins are growing.” The second argument: the expectation of monetary easing, which should go hand in hand with cyclical recovery. “Forecasts of 10% profit growth in the United States are credible. And when profits go up, it’s good for the stock market”, explains. And he adds that the nervousness in the markets is mainly related to uncertainty about interest rates. The whole question is when the Federal Reserve, and to some extent the European Central Bank, will cut rates.



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