Safe-Haven Demand for Gold

Dated events

1. Aug. 15, 1971 · Nixon suspends dollar convertibility into gold (the 'Nixon shock')
   President Nixon announced the US would no longer exchange dollars for gold at a fixed price, which effectively ended the post-war system. This worried investors because the dollar was no longer tied to gold, and they feared their paper money might lose value. As inflation rose in the following years, the price of gold climbed far above the old official price of $35 an ounce.
2. Oct. 6, 1979 · Volcker's Fed raises discount rate to 12% and shifts to targeting reserves
   The Fed, led by Paul Volcker, raised its discount rate by a full percentage point to 12% and announced a new approach to squeeze inflation out of the economy. Gold had been climbing all year as people worried about inflation, and after swinging in the weeks that followed it kept rising into early 1980 as those worries stayed high.
3. Sept. 15, 2008 · Lehman Brothers files for Chapter 11 bankruptcy
   The investment bank Lehman Brothers filed for bankruptcy during the worst financial crisis in decades, and suddenly nobody trusted any bank or company. People pulled money out of stocks and riskier bonds and bought gold because it is physical and cannot go bankrupt. Two days later, gold had its biggest one-day price jump on record at the time.
4. Aug. 5, 2011 · S&P downgrades the US credit rating to AA+ from AAA for the first time
   The rating agency Standard & Poor's cut America's credit rating from AAA to AA+ because Congress had fought over the debt ceiling and nearly defaulted on its bills. This shook confidence in the US dollar itself, so investors who held dollars rushed to buy gold instead. Central banks also increased their gold purchases because they wanted reserves that could not be downgraded.
5. March 15, 2020 · Fed cuts rates to near zero in an emergency Sunday move as COVID-19 spreads
   As the coronavirus spread and lockdowns began, stock markets fell sharply and the Federal Reserve made an emergency cut in interest rates to nearly zero. Gold first dropped below $1,500 as investors sold almost everything to raise cash, then climbed to a record of about $2,067 in August as near-zero rates left savings accounts and bonds paying almost nothing.

Assets named in this scenario · 6

Gold · Gold FuturesPalladium · Palladium FuturesPlatinum · Platinum FuturesSilver · Silver FuturesSPDR Gold SharesUS Dollar (USD)

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