The heightened volatility in global markets in recent days has brought renewed attention to how gold performs during periods of political and economic uncertainty.
After reaching approximately $5,100 per troy ounce on January 26, the price of gold subsequently rose to over $5,600, an all-time high. However, the rapid rise was followed by a correction of nearly 11%, with prices falling below the $4,900 threshold shortly after reaching the peak.
In the last week, gold has stabilized in the range of $4,500-$4,700 per ounce, signaling a cooling-off period after rapid gains in recent months and a transition towards a market consolidation phase. This type of development often surprises investors, who expect gold to immediately rise during times of crisis.
„Gold is widely perceived as a safe-haven asset, but its reaction is not instantaneous. At the beginning of each crisis, markets typically go through a phase of pressure before the actual upward movement begins.” states Victor Dima, Treasury Manager at Tavex Romania.
In the short term, several factors can put pressure on the price of gold, even amid increasing market uncertainties. These include higher government bond yields, increased demand for the US dollar, and capital migration towards yield-generating assets. Together, these dynamics increase the opportunity cost of holding gold, an asset that does not produce yield.
At the same time, political instability directly affects the population's currencies and economies. The recent depreciation of the leu reflects the overlap of political uncertainties with growing economic risks. Following the dismissal of the government led by Ilie Bolojan, investors reacted by withdrawing capital, which put additional pressure on the national currency, while the high budget deficit further eroded confidence in the economy. In parallel, signals from the central bank indicated a reduced willingness to intervene, allowing the leu to reach a historic low against the euro.
„When confidence in a currency weakens, the effects are immediately felt in people's economies. In such times, people look for assets that do not depend on the decisions of governments or central banks.”explains Dima.
This pattern is not unusual. Throughout major crises, from the oil shock of the ’70s to recent geopolitical tensions, gold has frequently experienced short-term volatility before entering a sustained upward trend. While short-term developments are influenced by liquidity and interest rates, the long-term direction is determined by inflation, debt levels, and confidence in the monetary system.
Locally, the same behavior can be observed in the growing interest in physical investment gold, especially among individual investors seeking to protect the purchasing power of their savings.
„We clearly observe that the demand for gold increases during periods of stress, not as a speculative instrument, but as a way to preserve long-term value. Understanding these stages is essential. The biggest mistakes occur when decisions are made out of fear, rather than based on how markets truly function.” adds Dima.
Recent market movements confirm that gold remains a key asset during periods of uncertainty, but its reaction is not linear. The initial decline should not be interpreted as a sign of weakness, but rather as part of a normal market cycle.