Gold and Bitcoin Hit Record: Safe Havens Climb as Uncertainty Persists

Economic

Summary:

The government shutdown in the US and the French political crisis have brought renewed uncertainty to financial markets.

Bitcoin and gold prices hit new records on Sunday and Monday, fuelled by growing financial uncertainty linked to the US government shutdown, and worsened by a fresh political crisis in France.

Less than a month after his appointment, French Prime Minister Sébastien Lecornu resigned on Monday, unsettling stocks and bonds in Europe's second-largest economy.

Gold prices were nearing $4,000 an ounce at the start of the week, boosted by expectations of further rate cuts by the US Federal Reserve, before retreating to below $3,970 around 10.00 CEST on Tuesday.

Demand for the precious metal has steadily risen since the beginning of the year, when it cost $2,669.

Gold's climb has partly been fuelled by increased central-bank demand and geopolitical tensions, which steer investors towards inflation hedges. A weaker dollar, which makes gold relatively cheaper for those holding other currencies, has also helped.

Meanwhile, Bitcoin — dubbed digital gold — climbed above $125,000 on Sunday, hitting a new record before topping this peak on Monday.

The world's largest cryptocurrency has increased in value by more than 30% this year, partly due to the US administration's crypto-friendly policies and concerns about dollar depreciation.

However, the hype around the crypto asset may not last long.

Thibault Desachy, head of investment & wealth management at Coinhouse, said: "We (Coinhouse) remain convinced that we are approaching the end of a cycle and that caution is warranted. It is advisable to adopt a more trading-oriented stance than an investment-oriented one in order to avoid getting caught up in a bear market."

European markets react to French political turmoil

Most of the leading European stock indexes ticked lower in the opening as the French political crisis weighed heavily on investment sentiment. The unexpected resignation of Prime Minister Sébastien Lecornu amid budget and cabinet disputes has pushed French stocks down and lifted French bond yields.

At around 11.00 CEST, the FTSE 100 in London had inched up slightly, but the CAC 40 in Paris lost more than 0.2%, the DAX in Frankfurt was down by 0.1%, and the IBEX 35 in Madrid was mostly flat.

The benchmark STOXX 600 was little changed. Healthcare and industrial companies' losses, among them Germany's Bayer and Denmark's Novo Nordisk, were offset by gains in luxury and energy companies' shares, such as those of LVMH, Kering and Shell.

At around midday, most of the European indexes had ticked back up into positive territory.

In commodities, Brent crude lost nearly 0.5% and was traded at $65.12 a barrel, and WTI crude was a few cents down to around $61.40 a barrel.

Meanwhile, though US futures slipped modestly on Tuesday morning, US markets are weathering the US government shutdown relatively well.

Trade on Wall Street was fuelled by company announcements on Monday. The AI boom is driving up tech stocks and increasing the market value of the largest tech companies, but the broader state of the US economy remains somewhat unclear because of the federal government shutdown, delaying data releases.

On Monday, the S&P 500 climbed 0.4% to an all-time high, closing at 6,740.28. The Dow Jones Industrial Average jumped 0.1% to 46,694.97, while the Nasdaq composite rose 0.7% to its own record, ending the day at 22,941.67.

In currency trading on Tuesday morning, the US dollar edged up to 150.49 Japanese yen from 150.35 yen. The euro cost $1.1695, down from $1.1714.

Source: Euronews

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