Standard Chartered informed clients that if gold continues to decline, the US dollar and yen may become the most attractive safe-haven assets.
Standard Chartered sent clients an analytical note in which it pointed to a possible strengthening of the positions of the US dollar and the Japanese yen in the event of a continued decline in gold.
Bank analyst Steve Englander noted that the price of gold has fallen significantly below the mark of 4000 dollars per ounce. According to him, this makes the metal technically vulnerable in the coming weeks. The next support levels are named 3800 and 3500 dollars.
The reasons for the sales were nervousness around the technology sector, sell-offs in the stock market and the general need of participants for liquidity. These factors affected highly liquid assets, including gold.
In the short term, according to Englander, gold's function as a source of liquidity may outweigh its role as a safe-haven asset. Over the past year, the correlation between gold and the dollar remained strongly negative: investors often sold dollars to buy the metal. Now this flow may reverse in the opposite direction.
The bank expects that the dollar and yen will show outperforming dynamics if the decline in gold continues. The list of safe-haven assets, according to analysts, has noticeably shortened. The euro is losing attractiveness due to political and budgetary uncertainty, the pound sterling remains the G10 currency with the lowest yield, and the Swiss franc is characterized by high volatility.
Against this background, the US dollar stands out as a more stable option. In addition, Englander added that central banks seeking to reduce dollar exposure may turn their attention to the yen: recent growth in yields, low beta and restored attractiveness make it interesting in conditions of risk aversion associated with asset market dynamics.