Financial risk management, value of gold, economic cycles, subprime crisis, capitalism, Covid-19 pandemic, financial crisis of 2008, speculative assets, safe-haven assets
The universal crisis of capitalism that shook the world in the year 2008 showed that speculative business, especially mortgage loans, are at high risk, because in the long term they triggered a crisis due to the bursting of the bubble financial. They have thus shown that there is no way to extract money from the real economy.
Lending banks have stopped asking customers for proof of income, they have stopped checking credit history or ability to pay, they have stopped checking that forms are correctly filled out. Loans that were issued at a variable interest rate had a high probability of default. This means that if the interest rate was lower, the commission payable was lower; but if the commission started to increase, the same procedure would be followed. We observed that the value of gold had a seesaw trend during the financial crisis of 2008 and during the COVID-19 pandemic, the trend was upward. We can therefore ask ourselves what is the most favourable period to hold gold? Should gold be held in normal times or in times of crisis?
[...] Meanwhile, investors flock to investments considered safe; investments such as gold. This phenomenon inevitably leads to an increase in their price. Gold is considered a safe haven asset (Vedie, H. L., 2020) which is very often used as a hedge against inflation (Carpantier, J. F., 2021) and as a hedge against fluctuations in the US dollar. It must be remembered that when the markets go down and they are in crisis, gold tends to go up. Since the beginning of the crises, gold was one of the preferred assets of investors, this was due to the fact that, being a safe haven, it presented less risk in times of crisis. [...]
[...] We can therefore ask ourselves what is the most favourable period to hold gold? Should gold be held in normal times or in times of crisis? Problem Is there a causal relationship between the prices of speculative assets and those of safe-haven assets, in this case gold? Rationale and significance of the study The study of economic crises is very important because it allows us to understand how the economy works, and how the behaviour of financial assets has evolved so far. [...]
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[...] Baur, D. G., & Lucey, B. M. (2010). Is gold a hedge or a safe haven? An analysis of stocks, bonds and gold. Financial Review, 217-229. Bentes, S. R. (2015). Forecasting volatility in gold returns under the GARCH, IGARCH and FIGARCH frameworks: New evidence. Physica Statistical Mechanics and its Applications 355-364. Bernstein, P. [...]
[...] Interest rates have fallen and investors' position in the gold market has strengthened. Overview of the evolution of gold prices during the crises of 2008 and 2020: Gold is considered an excellent hedging value, and this is reflected in the evolution of its value for more than 50 years and over the years central banks around the world have started to increase the value of gold to reduce their dependence on the dollar. In 2007 and 2008, the "subprime crisis" began to break out in the United States, which was accompanied by an overvaluation of assets and caused damage to many financial institutions, which spread to all countries around the world, causing uncertainty in financial markets. [...]
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