Weekselectie: Goud weer op Recordhoogte en de ECB waarschuwt voor nieuwe crisis Eurozone

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This week, the ECB warned of a potential new crisis in the eurozone. Through a series of charts, we aim to present a clear picture of the worrying situation. At the same time, we see that the gold price has once again reached a new record high today. In last week's selection, we wrote about a pause in the gold bull market. The professionals' outlook remained highly optimistic, and they now seem to be proven right. What are the expectations for the gold price?

On the Path to a New Crisis in the Eurozone?

This week, the European Central Bank (ECB) warned that the eurozone risks a new debt crisis if euro area countries fail to stimulate growth and reduce public debt. In its annual Financial Stability Review, the ECB highlighted issues such as high public debt and budget deficits, uncertainties stemming from election outcomes, and poor compliance with EU budgetary rules (see last week's selection on France).

Luis de Guindos & Christine Lagarde (Source: ECB)

“The headwinds to economic growth from factors like low productivity make it more likely that high debt levels and deficits will again raise concerns about debt sustainability,” the ECB cautioned. According to Luis de Guindos, Vice-President of the ECB, markets have become more focused on fiscal risks. Interest rates for countries with debt exceeding 100% of GDP have risen significantly in recent times. Last week, we noted that even Germany is likely to abandon its famous debt brake and take on more debt.

“In a context of heightened macro-financial and geopolitical uncertainty, a sudden and sharp reversal in risk sentiment could occur, given high asset valuations and concentrated risk exposures in the financial system,” the ECB report added. Furthermore, the combination of low growth and high public debt could complicate European governments' plans for increased investments in defense and climate policies.

GDP per Capita (Source: Michael A. Arouet)

Last week, the European Commission downgraded its 2025 growth forecast for the eurozone to just 1.3%, warning that the region risks falling further behind the U.S. European stocks have lagged behind their American counterparts for some time. Dominated by older sectors like banking, energy, and industry, European stock markets have not kept pace with American growth.

European Stocks Lag Behind (Source: Financial Times)

Meanwhile, Sweden's Klarna, like Spotify in 2018, has opted for the U.S. stock market over a European one. In recent years, many European unicorns have moved their headquarters to the U.S. The entire German stock market has now been surpassed by three American tech giants: Nvidia, Apple, and Microsoft. Each of these companies has a higher market capitalization than all listed German firms combined.

Market Capitalization: German Stock Market vs. Apple, Nvidia, and Microsoft (Source: Holger Zschaepitz)

Since Trump's election, the euro has significantly weakened against the U.S. dollar. This week, the exchange rate fell below $1.05, the sharpest drop since the 2022 energy crisis. According to the Financial Times, this is because investors expect the European slowdown to prompt the ECB to cut rates more aggressively. “In the absence of European fiscal stimulus, support will likely have to come from the ECB,” said Chris Turner of ING.

EUR/USD Exchange Rate (Source: wisselkoersen.nl)

Turner added that investors fear being caught in a looming trade war with Trump now reelected. The eurozone currently enjoys a large trade surplus with the U.S., which could change if Trump imposes tariffs or uses the threat of tariffs to gain better access to European markets. Jeroen Blokland shared a complete list of causes for the weak euro on X.

The ECB itself is in a challenging position. This week, wage growth in the eurozone surged to 5.4%, the highest increase since the euro's introduction. This could signal the onset of a new inflation wave. Earlier this week, Frank Knopers published an article on Holland Gold arguing that we are already in a wage-price spiral.

Wage Growth in the Eurozone (Source: Holger Zschaepitz)

Perhaps Europe could draw inspiration from Argentina’s approach. Argentine President Milei appears poised to significantly reduce the deficit, debt, and inflation. He aims for a smaller government, lower taxes, and reduced regulation. Despite massive spending cuts, Argentina's economy seems to be recovering.

Gold Price Hits Record High

The gold price has reached a new record high today. At the time of writing, it stands at over €83,000 per kilogram. Last week, we wrote about a pause in the gold bull market. Professional forecasts for gold remained highly optimistic, and they now appear to be correct. According to Ole Hansen, Head of Commodities at Saxo Bank, this is the strongest week for gold since October 7 last year, following the Hamas attack.

Gold Price on Friday, November 22 (Source: Holland Gold)

Earlier this week, Bloomberg reported that Goldman Sachs strongly recommended buying gold with the statement “Go for gold.” They predict a price of $3,000 per troy ounce by December next year, citing higher demand from central banks as the structural factor behind this forecast.

For a longer-term gold price prediction, check out this week's podcast featuring renowned gold analyst Jan Nieuwenhuijs. He predicts a gold price of $8,000 per troy ounce within a few years. In the discussion, he explains that this increase is necessary to restore balance to the international monetary system. This would represent a tripling of the current gold price. He also mentioned in the episode that Europe has been preparing under the radar for a new gold standard.