7 Reasons to Seek a "Safe Haven"

"We are living in turbulent times" is the maxim we keep hearing. Each day, this feels more true, especially after the assassination attempt on Donald Trump's life at a presidential campaign rally on July 13th. It's times like these when many investors rush to "safe haven" assets like gold and silver. And indeed, 2024 has seen a healthy consumption and rises in the prices of both metals with even more bullish projections being published each week. Are we living in more troubled times than most? Or is the speculation an overreaction? Putting the present in context of the past is often difficult. However, below we've identified 7 issues that are cause for concern today and compared them to those of yesteryear.

1. Increasing Political Polarization
   Political polarization in the United States has reached levels not seen since the Civil Rights Era of the 1960s. The assassination attempt on a major political figure underscores the intensity of current political divisions. This polarization has led to gridlock in Washington, decreased public trust in government institutions, and increased social unrest. Comparatively, while historical periods like the Vietnam War era also experienced deep divisions, today's 24/7 media cycle and social media platforms amplify and perpetuate these divides, making resolution and consensus more challenging.
2. The Recent Inflation Surge
   The post-pandemic economy has been characterized by a significant surge in inflation, reminiscent of the 1970s. In 2022, inflation in the US reached heights not seen in over 40 years, driven by supply chain disruptions, increased consumer demand, and expansive fiscal policies. This surge has led to rising costs for everyday goods and services, squeezing household budgets and increasing uncertainty about future economic stability. Historical comparisons show that while the inflation of the 1970s was driven largely by oil shocks, today's inflation is more multifaceted, with global supply chain issues and shifting labor market dynamics playing significant roles.
3. Energy Crisis
   The current energy crisis, exacerbated by geopolitical tensions such as the Russia-Ukraine conflict, has led to soaring energy prices and concerns about energy security. Europe, heavily dependent on Russian gas, has faced particularly acute challenges, prompting urgent shifts towards alternative energy sources and renewed focus on energy independence. This crisis echoes the oil embargoes of the 1970s, which similarly caused economic turmoil and forced nations to rethink their energy strategies. However, today's crisis is occurring in the context of a global push towards renewable energy, adding a layer of complexity as countries balance short-term needs with long-term sustainability goals.
4. The USD's Uncertainty
   The dominance of the US dollar in international trade, particularly in oil transactions, is being questioned. Countries like China and Russia are exploring alternatives to the dollar for international trade, which could undermine the dollar's position as the world's reserve currency. This uncertainty can lead to increased volatility in currency markets and affect international investment flows. Historically, the dollar has faced challenges before, such as during the 1970s when the Bretton Woods system collapsed. However, the current geopolitical landscape and advancements in digital currencies present new difficult-to-predict variables and further complicate the issue.
5. Global Supply Chain Disruptions
   Global supply chain disruptions have become a hallmark of the post-pandemic world, affecting everything from semiconductors to consumer goods. These disruptions are driven by a combination of lingering effects of the COVID-19 pandemic, geopolitical tensions, and logistical challenges. The impact is widespread, causing production delays, price increases, and shortages. Historically, supply chain disruptions have occurred during major conflicts and crises, but the interconnectedness of today's global economy makes the current disruptions particularly severe and far-reaching.
6. Interest Rate Hikes
   In response to rising inflation, central banks worldwide, including the Federal Reserve, have implemented significant interest rate hikes. These rate hikes are intended to cool down the overheated economy but also increase borrowing costs for consumers and businesses, potentially slowing economic growth. Comparatively, the aggressive rate hikes of the early 1980s under Federal Reserve Chairman Paul Volcker successfully curbed inflation but also led to a severe recession. Today's rate hikes aim to strike a delicate balance between controlling inflation and sustaining economic recovery, but it is like walking a tightrope.
7. Growing Threat of Cyberterrorism
   Cyberterrorism has emerged as a significant threat in the digital age, with the potential to disrupt critical infrastructure, steal sensitive data, and undermine public confidence. High-profile cyberattacks, such as the Colonial Pipeline ransomware attack in 2021, have highlighted vulnerabilities in essential services. The sophistication and frequency of these attacks are increasing and the threat of cyberterrorism is more pronounced now than ever before. It's driven by our growing digital dependency, advanced cyber capabilities, and the persistent vulnerabilities within critical infrastructure. The global reach and anonymity afforded by the internet further complicate efforts to combat this threat.
   
   Given the current climate of uncertainty, owning gold and silver could be a prudent strategy for a variety of reasons. These precious metals have long been considered "safe haven" assets, providing stability and security when traditional investments falter.
   
   Hedge Against Inflation: With inflation surging to levels not seen in decades, the purchasing power of fiat currencies is eroding. Gold and silver, on the other hand, tend to retain their value and even appreciate during inflationary periods, offering a reliable store of wealth.
   
   Protection Against Political and Economic Instability: The increasing political polarization and economic instability underscore the need for assets that can weather such storms. Historically, gold and silver have shown resilience and have often increased in value during times of crisis, acting as a buffer against market volatility.
   
   Diversification: The current energy crisis, uncertainty surrounding the US dollar, and global supply chain disruptions highlight the fragility of interconnected markets. Adding gold and silver to an investment portfolio diversifies risk and can provide peace of mind when uncertainty is high.
   
   If Lear can help you prepare for what's ahead, call us at 1-800-576-9355.