Gold’s Price Nears Record High, Driven by Uneasiness

Shaky banks and other worries propel the haven investment upward.

The world has the jitters, so guess what asset is closing in on its record high?

Gold, the classic refuge investment, is fetching $2,020 per ounce, nearing the $2,069 peak set in pandemic-panicked 2020.

History suggests that the yellow metal will keep on trucking. It finished 2023’s first quarter up 7.8%. As Bespoke Investment Group observed in a commentary, “In the 25 prior years gold has posted a gain in Q1, it has averaged a rest-of-year gain of 12.4%.”

Bespoke added that drops in yield, such as those Treasurys have shown of late, always aid gold’s advance. Treasurys, which pay interest, is the premier haven investment, and gold kicks off zero income for investors.

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Even more important are the worry factors, according to the World Gold Council, the metal’s trade group, pointing to the recent convulsions among regional banks and the failure of two lenders, Signature and Silicon Valley Bank

“With a U.S. recession still on the cards, growing systemic risk adds to gold’s case,” the group wrote in an investors’ note. Up ahead is the pending debt ceiling fight on Capitol Hill, which threatens to make Washington default on its debt.

Gold has also outpaced other asset classes thus far in 2023, up 10.9%, according to BlackRock. In second place are European stocks, with the MSCI Europe ahead 10.7%.

The commodity’s good fortune also is reflected in gold mining stock performance. The VanEck Gold Miners exchange-traded fund is ahead 18.6% this year after losing money in 2022, per research firm Morningstar. Production costs for an ounce of gold  have not changed, so ascending bullion prices fatten the miners’ earnings.

So while investors and analysts remain on edge about, well, everything, expect gold to have the edge when it comes to in-demand asset classes.

Recent Investment Company Act Exemption Could Lay Groundwork for More

SEC defines parameters for one tech company to invest in ‘capital preservation instruments’ without having to register as an investment company.



The Securities and Exchange Commission recently issued an order allowing an unnamed company, under certain conditions, to hold securities in excess of 40% of its total assets without having to register as an investment company.

Under the Investment Company Act of 1940, companies which hold more than 40% of their assets as securities must register with the SEC as an investment company. If they fail to do so, they cannot take on debt or sell stock in their company, and the SEC is even empowered to void their contracts, according to Amy Caiazza, a partner and head of the fintech and financial services group at the Wilson Sonsini Goodrich & Rosati law firm. Treasuries are not counted toward the 40% threshold.

Operating companies are sometimes swept up by this law if they have few tangible assets. Caiazza explains that many tech firms do not have a lot of equipment or inventory, so even relatively small investments can reach the 40% threshold quickly. Additionally, many tech firms hold much of their worth in less tangible assets not counted by the SEC, such as intellectual property rights. Their trouble lies not in having a high numerator of securities, but in having a low denominator of non-securities by which to divide out their securities into a sub-40% total.

Caiazza explains that the 40% threshold was designed in 1940 to distinguish operating companies from investment companies, but the threshold does not make sense for certain tech firms in 2023. Many tech companies will invest in low-return securities, such as corporate bonds, as a cash management and consequently, exceed the 40% threshold and run into trouble with the SEC.

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As an alternative to registering or going out of business, companies can apply for a cash management order, which is an exemption from this requirement. In this case, Wilson Sonsini was able to acquire an order from the SEC for a client which permits that company to invest “without limit in ‘capital preservation instruments’ such as invest-grade corporate bonds, commercial paper, certificates of deposit, and other highly liquid, investment-grade securities,” without having to register as an investment company.

The SEC set certain conditions on the exemption. The company must use these cash management instruments to fund its business operations, it cannot engage in speculative investing and no more than 10% of its assets can be in non-exempt securities.

Caiazza is optimistic this order can be used as a model for similar orders, and she says staff at the SEC wrote this order with an eye toward standardization, though Caiazza notes that companies cannot rely on orders and exemptions given to other companies and must secure their own in the absence of a rule.

Caiazza acknowledges that the SEC order reads like a rule proposal and that a rule would certainly make life easier for other tech firms concerned about the 40% threshold.

When asked why the SEC relies on orders of this kind instead of a rule change, Caiazza said, “It probably is time for the SEC to consider adopting a new rule that would apply to tech companies.”

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