Investors flock to gold as US banking crisis rages – JPMorgan

Gold prices have been hovering near record highs this week on renewed investor concerns of a deepening US financial crisis and the possibility of a recession this year. 

According to JPMorgan strategists, cited by Bloomberg on Friday, the so-called ‘long duration’ trade, which is expressed by being overweight on gold and growth stocks, “seems to have become a consensus” in recent months.

“The US banking crisis has increased the demand for gold as a proxy for lower real rates as well as a hedge against a ‘catastrophic scenario,’” the strategists wrote in a note seen by the outlet.

They argued that such a trade looks “relatively attractive” as it would have “limited downside in a mild US recession scenario, but plenty of upside in a deeper recession.” 

Institutional investors have turned to gold, while retail investors boosted exposure to Bitcoin, according to the report, which indicated that the share of tech in global equities has risen sharply this year.

This week’s announcement by regional US bank PacWest that it was exploring a potential sale has sparked concerns that it could become the next US lender to implode, following the collapse of three regional banks since March. The news pushed trading in gold futures on the Comex exchange to match its all-time high of $2,072 per ounce on Thursday. The spot gold price also jumped to $2,072.49 on the same day, according to Refinitiv.

Investors traditionally turn to gold in times of market uncertainty to hedge risks and as a store of value. Throughout history, bullion has been seen as a safe haven during periods of economic instability, stock market crises, military conflicts, and pandemics.

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