Will tensions in Taiwan impact the gold price?

The gold price was heavily impacted last March by Russia's invasion of Ukraine. Now, investors must ask themselves whether the conflict between China and the United States in Taiwan will once again influence the price of gold. Let's decipher the current situation to better understand the possible consequences on the financial markets.

he risk of a geopolitical and financial shock in Taiwan

The outcome of the dispute between China and the United States is of interest to the whole world because it will surely have an impact on the global economy and financial markets. According to trade journalists, the recession that may result from a war in Taiwan will be even more severe than the Covid-19 crisis.

For the time being, China has only taken a hard line. Although no open conflict has broken out so far, the risk of this happening has not yet been ruled out. It should be noted that in the event of a war between these two great powers, the global economy will be hit by massive shocks with serious geopolitical and financial consequences.

It should be remembered that international supply chains rely heavily on China. A complete restructuring of global supply will have to take place in the event of an open conflict.

Potential conflict in Taiwan: what impact on the gold price?

Over the past 20 years, the price of gold has risen steadily. In the first half of 2022, prices have continued to rise: 18% as of March 2022, then, after a small stagnation in May 2022, the rise should resume. According to estimates by industry experts, this increase could reach 25% between 1 January and 21 December 2022.

It is also important to understand that since 15 July 2022, the price of an ounce has risen due to favourable seasonality, but also due to the economic situation. Players are hoping that the Fed's (US Federal Reserve's) rate hike will slow down with the current inflation.

Thus, investors are expected to turn to gold, which would increase demand and drive the price up. Although no open conflict has yet erupted, the provocations and risks involved are already impacting the prices posted on the markets.