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Opinion National Interest PoV 50-Word Edit

ThePrint On Camera Videos In Pictures

Society & Culture Around Town Book Excerpts Vigyapanti The Dating Story

More Judiciary Education YourTurn Work With Us Campus Voice

Gold prices are falling during war. It’s a clear sign that real economic shock is coming

Although economic growth has decelerated, it hasn't collapsed, leading markets to prematurely conclude that global economy has withstood the shock. This conclusion is premature.

Gold prices are declining at a time when an increase would be expected. Typically, geopolitical tensions such as the conflict in the Middle East, disruptions in oil supply, and escalating geopolitical uncertainties would drive investors towards safe-haven assets like gold.

However, the current softening in gold prices is not contradictory; rather, it is a clue. It implies that market reactions are no longer predominantly driven by fear but are instead influenced by liquidity dynamics—specifically, the availability of cash, the demand for it, and the adjustments occurring in balance sheets under pressure.

When gold fails to function as a traditional safe haven, it often signifies a more profound underlying shift. This shift pertains to the global economy’s delayed absorption of the impact of elevated interest rates.

Over the past two years, economic debate has focused on inflation and central bank monetary tightening. Rates have risen significantly and have subsequently stabilised. Although economic growth has decelerated, it has not collapsed, leading markets to prematurely conclude that the global economy has withstood the shock. This conclusion, however, is premature. The current phase is not characterised by a high-rate economy but rather a refinancing economy, wherein the genuine effects of previous rate hikes begin to manifest through the resetting of debt.

The illusion of resilience

Between 2020 and 2021, global borrowing occurred at historically low interest rates. Governments increased deficits, corporations secured inexpensive funding, and a........

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