Gold and precious metals, like many sectors of the economy, have had a harrowing 2022. However, the gold market is experiencing some October momentum as fears of a global recession renew safe haven interest in the metal.
The ISM manufacturing index fell to 50.9% as data from the Institute for Supply Management indicated that manufacturing missed expectations in September. “The U.S. manufacturing sector continues to expand, but at the lowest rate since the pandemic recovery began. Following four straight months of panelists’ companies reporting softening new orders rates, the September index reading reflects companies adjusting to potential future lower demand,” said Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee. New orders dipped to 47.1%, down from August’s 51.3%, while the production index rose to 50.6%, up from 50.4%.
More Bad News Creates Desire for Safe Havens
Gold benefited from the gloomy news and was also buoyed by reports that Credit Suisse may be in financial trouble and by fears around the U.K. government’s tax-cut plan.
Broker SP Angel this morning said in an email dispatch, “A global tightening of liquidity by central banks is hitting the credit sector, with signs of a credit crunch beginning to surface. A syndicate of banks including Barclays and Bank of America cancelled a $3.9 billion debt offering last week amid a lack of demand. Bloomberg reports a group of underwriters including Goldman Sachs, Bank of America and Credit Suisse took losses estimated at over $1 billion on a debt package to private equity firms amid higher yields and lower demand. Outflows in U.S. investment grade bonds hit their third largest outflow on record last week, following six weeks of withdrawals totaling $22.3 billion. Credit default swaps across major European banks have soared in September, with Credit Suisse’s CEO noting the bank was facing a ‘critical moment.’"
With the U.K. witnessing its currency sliding to an all-time low earlier on Monday, interest in bullion has surged. “We’re seeing a lot of new UK interest,” said Adrian Ash, head of research at the firm. “The interest rate and inflation crisis is global, but gold is saying that the UK has put itself right in the eye of the storm.”
Jim Tannahill, managing direction of Suttons and Robertsons, said, “We anticipate we will continue to see an upward trend in people using gold as loan collateral in the coming months whilst this period of extreme uncertainty exists.”
Where to Invest in Gold
As markets around the world reel and uncertainty looms amid global inflation, climate crisis, and geopolitical trouble, investors could benefit from increasing their allocations to safe have assets like gold. Direct exposure to physical gold can be found in the Sprott Physical Gold Trust (PHYS ) or the newly launched Sprott ESG Gold ETF (SESG ), which sources gold from environmentally friendly mines. An equities play is possible through gold miners such as the Sprott Gold Miners ETF (SGDM ) or the Sprott Junior Gold Miners ETF (SGDJ ).
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