Recently, ECB warned about distortion in the markets. And indeed, current geopolitical events make investors nervous about the right decisions to make, especially in commodities. After certain declarations on a presidential level during the last few days (switching the direction like a weather cock), the prices went up in expectation of shortages and corrected right on the following day.
Nobody knows exactly, what would be the next steps in the Israel vs. Iran conflict and how the hostilities around the globe (either hot wars or economic and tax wars) could impact the markets. Technical analysis could provide just a part of the necessary insights showing the current trends, but they do not really include the global political development which can break any technical analysis within seconds.
As we’ve already written in the past, in turbulent times with extreme stock markets volatility, precious metals are regarded as a safe haven to protect one’s own assets, offering a good hedge. Precious metals keep their intrinsic value due to limited resources; they are not a liability of any third party and therefore do not contain any default risk.
Since 2022 the purchase of gold by central banks (especially those of emerging countries) went up significantly showing the move from USD as a reserve currency in those countries towards gold as a more stable and reliable reserve method.
At the same time, the price for gold rushed from one all-time high to another. At the moment, this article is being written, one oz gold is handled at 3368 USD, while just a year ago the price for one oz was 2328 USD. An increase of nearly 45% within 12 months.
According to Bank of America Global Fund Manager Survey conducted in February and March 2025, 58% of asset managers expect gold to be the best-performing asset in case of a full-blown trade war scenario.
Now, let’s come back to the warning of the ECB. According to analysts of the ECB, the current distortions could put in danger the whole financial system. And the reason is the increasing preference of investors for precious metals, specifically for gold.
But how does it corelate to the general gold preference and why this warning?
Well, the point is that many investors trade gold in future markets and particularly in futures contracts with physical delivery. The number of future contracts in January 2025 was the highest since July 2007. Investors in the Euro area are exposed to gold via derivatives. A significant part of these derivatives contracts is traded Over The Counter (OTC). Around 48% of these derivatives have banks as counterparties. But the derivatives and the promises of delivery are only as good as the counterparty behind them.
Commodity markets are subject to a number of vulnerabilities. In stressed markets, margin calls and unwinding of leveraged positions could appear more on the agenda, which would lead to liquidity stress. Disruptions in the physical gold market could even more increase the risk of a squeeze.
All in all, holding just certificates and derivatives does not ensure to 100% that you can really get the physical gold when it’s about time to deliver it. Our customers are more on a secure side when directly purchasing the physical gold with a guarantee of having it in a high-secured duty-free storage in Switzerland. You can buy and sell it at any time in quantities or fractions of quantities you desire.
All the advantages of why you should open your vault with our partner using the Singabiz registration link are shown in detail here.
Further info regarding precious metals you can find here:
Precious Metals in the Current Situation
In case you would like a consultation before engaging with our partner, feel free to approach us and one of Singabiz representatives will be glad to assist you or even to arrange a meeting.
