Analysts warn of accumulating risks in private credit, gold may become a "safe haven" for investors

(1) Unicus Research CEO Lakshmi Ganapathy stated that one should not expect gold prices to drop soon, as the risks accumulating in the private credit market are threatening to spread to the broader global economy and will once again boost demand for gold. She pointed out that since 2022, central banks have been purchasing nearly 1,000 tons of gold annually, which indicates the direction the world is heading. (2) Ganapathy warned that one of the biggest risks to the financial system is the rapid expansion of the private credit market—from about $4 billions in 2000 to nearly $2 trillions today, and it operates outside traditional regulation. Most of these loans are unrated, asset prices rely on internal valuations rather than market pricing, and there is a lack of transparency. Many private credit funds are deeply interconnected with traditional banks and could trigger a crisis due to loss of confidence rather than actual losses. (3) The risks have extended to the consumer finance sector, including commercial real estate, auto loans, and buy-now-pay-later plans, creating systemic vulnerabilities. Ganapathy expects the next recession to be slower and more prolonged (2025 to 2027), possibly accompanied by economic stagnation and persistent inflation, forming conditions similar to stagflation. (4) She advises investors to focus on capital preservation rather than chasing high-yield credit products. Although gold does not generate returns, it becomes a means of storing value in a world of persistent government deficits and debt monetization. She reminds investors to check for private credit risk exposure in products such as retirement funds and to understand the composition of their investment portfolios.