Gold Ten Years After Lehman Brothers

We know, it’s just a symbol. But it’s a powerful symbol of the most severe recession since the Great Depression. Yup, it’s another article about the Lehman Brothers’ collapse. But we really invite you to read it, as we thoroughly analyze the impact on that bankruptcy on the price of the yellow metal. You will also find out what can we learn from the 2008 banking crisis for the gold market.

Ten years! Really, we did not believe, but the calendar does not lie. Last month, a decade has passed since the Lehman’s bankruptcy. As people love round anniversaries, everyone is reflecting now upon that event. So we decided to put our two cents into the discussion. What we have learned over the past ten years about the Great Recession – and the gold market?

Let’s start from the price developments. The chart below shows the gold prices since the Lehman Brothers’ collapse. The obvious conclusion is that the last decade was overall positive for the shiny metal. Its price on September the 11th, 2018 was about 60 percent higher than on September the 12th, 2018, just before it all began.

_{Chart 1: Gold prices (London P.M. Fix, in $) since the Lehman Brothers’ bankruptcy}

However, it is as obvious as a simplified observation. The more accurate description is that when the Global Financial Crisis burst, there was an impressive rally in gold until September 2011, when it peaked. As the confidence returned to the financial markets, the gold bull market switched then into the bear market, which basically lasts until today (alternatively, we can say that gold has been in a sideways trend for a few years).

But let’s dig into the gold’s price behavior around ‘Lehman moment’ even more. As one can see in the chart below, the price of the yellow metal rallied in the second half of 2007, as the global economy started to reveal signs of an impending turmoil. However, after the Fed rescued Bear Stearns in March 2008, the price of gold plunged from $1,011 to $750 just before the Lehman Brothers’ bankruptcy on September the 15th, 2008. After that, it initially increased from $750 to $775. Gold continued the rally until September the 29th when it reached $905.