Why aren’t investors fleeing to gold?

Today, global stock markets plunge again as the Middle East crisis intensifies.

Plus, oil and gas prices continue to climb under disrupted supplies.

And President Trump's shipping and insurance protections offer only partial relief.

This is Reuters Morning Bid bringing you unfiltered market news and analysis

straight from the Reuters newsroom seven days a week. I'm Anna Shemansky in London.

And I'm Mike Dolan. It's Wednesday, March 4th.

Well, it's a new day, but it's the same story.

The Middle East conflict shows no signs of abating and markets are responding pretty dramatically.

What are we seeing? Yeah, day four and little or no sign of this de-escalating

anytime soon, I think. And there's a lot of hopes in the market that recent

conflicts like this seem to dissipate very quickly when a few days. That doesn't seem to be the case.

Energy price still climbing, but the Asian markets today particularly got a battering.

The best performing market of the year by some distance is plummeting.

South Korea's Caspi, which is its benchmark stock index, fell 12% today.

It's the biggest one they decline ever.

And that has to do both with a risk of sentiment, also the fact that Korea's obviously a

net energy importer. Yeah, I think a lot of the Asian markets are particularly exposed to

energy, big energy importers, Japan, China, and Korea, and big manufacturing bases as well,

not least in the in the tech space, obviously. And their energy needs clearly now are

more expensive, and there's a risk of that supply disruption lasting a long time.

So a lot of great degree of nervousness, but I think the other factor of course is that

the markets that we're doing is so well prior to this are the ones which are as you'd expect

suffering most. And I think maybe as portfolios and mixed portfolios around the world go back to

some more neutral settings and even some building cash, then clearly these are the markets that are

going to get affected most. And then Japan, the Nikkei, which was down almost 4% today,

was also one of the best performing markets of 26 so far.

Well, some of the other best performing assets early this year were obviously precious metals.

And gold has not performed exactly as one would have anticipated.

This is a really peculiar story, right? You would have thought the classic safe haven is gold,

that's kind of what people were buying, it's almost doubled over the past 12 months.

And suddenly you get the crisis that most people would think would send gold surging,

and yesterday at least fell about 4% to 5% and silver down 10% or more.

Now they stabilize a little bit today, it has to be said, but it is peculiar as to why this

hasn't happened. And there are a number of reasons. One is exactly the point we were discussing,

one of the best performing markets gets sold up. There has also been a big jump in the dollar.

And I think that is related to things. A search for liquidity and liquidity in the sense of

just dollar cash around the world, if there is a need for being able to transact

without having physical holdings of anything, then dollar cash is kind of the default place to go.

And there's also the idea that the United States, of course, relatively speaking is less

affected than other economies in Asia or in Europe from a protracted energy squeeze.

And so I'm going back to energy prices. Obviously they have risen, but given the scale of the

conflict, everything we're seeing, they haven't actually risen that much. And that really does speak

to the fact that the US is, while the biggest energy consumer, they're also the biggest energy

producer. Yeah, so that's the whole jam and that's changed geopolitics in itself over the

recent years, the very fact that the US is almost self-sufficient in energy, certainly in petroleum

products to net exporter in liquid natural, in a liquefied natural gas, it's also a net exporter.

And I think after the Ukraine more, or the Korean invasion four years ago, the US clearly

becomes a very important exporter for many regions, not least Europe. So there's also

sort of factors at play there, but I think also brings us to the other development overnight,

which is President Trump's attempt to kind of calm the energy market, or at least calm the

supply disruption by offering the possibility of shipping insurance that is difficult to come by

right now for obvious reasons. Going through obviously the straight-of-hormose.

Yes, going through that particular narrow waterway that's now effectively blocked,

and also holding out the possibility of US naval support for, for cornbys coming through that,

which is not unprecedented. It happened, I think, shortly after 9-11 and also during the Iran

Iraq war in the 1980s. So there is some precedent for that. But some of that might help

Cam, US energy market as well to global, but it's really something that would take weeks to organize.

Properly, I think most people feel that that is not a silver bullet by any stretch of the

imagination, and also that speaks to the idea that the longer this squeeze lasts, the more problems

and more damageable it will create. Yeah, 100%. It just seems like, well, yes, you have had an

increase in oil prices. Given everything that's happening, given the scale of this, it's honestly

quite surprising that oil prices haven't increased more than we've already seen, and going back to

something you said earlier in this conversation, markets are used to these energy crises being

resolved relatively quickly. Obviously, we have the ongoing conflict in Russia and Ukraine, but

markets have adapted to that. And so it seems like that's being used as a model, but this situation

seems quite different. And I think the big problem as well is that even if you could see over the horizon,

some calming of situation in the Middle East, when you come up for air, look what's waiting for you.

I mean, there's an awful lot of worry about the credit markets, private credit markets, again,

this week, which has been rumbling for a few weeks, at least, if not months. And of course,

the question marks over AI and all that disruption. So it's not exactly clear water when you

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And for today's recommended read, check out Mike's column,

and when gold has failed to rally as the crisis has unfolded, the link is in the show notes.

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